Friday, September 15, 2017

Pitch and Catch

The recent Foxconn deal in Wisconsin comes to mind, the new statement by Amazon with their quest for a secondary headquarters, the Carrier deal and many others figure into the hysteria by States to offer whatever tax incentives, grants and other accommodations to get business to relocate or build offices, plants or facilities in which to generate jobs and income for both the populace and ultimately the State, largely indirectly through a more regressive tax structure - taxes on gas, sales and other means - that enable the bottom line and bragging rights. But this is what is often referred to as Corporate Welfare and good thing as Corporations are people too!

There have already been some warning signs with another program here than was to encourage start ups which they found few to no jobs created for millions given. Then we have the push for sports teams in which to build massive empires and tributes to their industry in the forms of stadiums and other auditoriums that are funded on tax payers backs with the supposed belief that they will generate jobs and income to the city for its generosity. See the current Oakland and St. Louis fights over that issue. And lastly we have here in Nashville a push for Major League Soccer to an already corrupt and well known group of liars to somehow make Nashville more of an "it" city. While the City itself is struggling already under the weight of that moniker so I say kick that ball to the curb before taking that on. They already are under fire for the baseball stadium cost overruns in the hysteria to get a place for the secondary minor league team that plays there a whopping 4 months a year. Sure let's build another one!

In the meantime the "richest" County in Tennessee is raising sales taxes to pay for schools that desperately need to be built or remodeled to accommodate the growing population. Here sales taxes and property taxes are being raised to pay for infrastructure growth and yet none of it will go towards flood protections which may be the next great crisis to hit here. As for the schools.. well forget it.

The idea of a company town is one I discussed in relation to how Seattle and Amazon's co-dependence is essential and yet it is a double sided coin. With growth comes money and change and in turn gentrification costs as housing and infrastructure has to be build to accommodate the increasing population and their needs. It also means price gouge time as when there is money there is a push to raise costs with the idea that everyone is getting a piece of the pie. Well the size of said pie varies but hey it is still pie! I see it here but the reality is that in Seattle the City Council runs the City and in turn the Mayor can be a significant bull in which the china shop is battered through. That can be said of both the prior Mayor, McGinn and the now current ex-Mayor, Child rapist Murray, who were instrumental in breaking things they bought. Seattle has always been a town of the process and with that process came much discussion and hand wringing but in the new century we were back to our bashing ways of history. Perhaps that WTO riot marked the time the City changed. Much like the flood of 2010 in Nashville that brought a change in the waters and ways to the City of Now which in turn is struggling with those rising and ebbing tides.

This article in the The Guardian discusses what it means to be a Company Town and in turn the rise and fall of said designation. That is not all Peaches and Cream with that and there are many other stories about towns and cities across America who have had similar stories, many made into movies with John Travolta even!

Careful what you wish for is how the adage goes. Sometimes a great pitch is followed by a great catch and other times it is better to catch and release.

Capital grants for failed Economic and Community Development deals shifted to West Tennessee megasite

Nate Rau, USA TODAY NETWORK - September 15, 2017

Lithium-ion batteries for the Nissan Leaf are produced in a new plant in Smyrna, Tennessee The Tennessean

Critics say capital grant campaign is an example of government lacking transparency and corporate welfare costing taxpayers money.

Tennessee’s program providing capital grants for companies promising to bring jobs here saw three projects never materialize and quietly shifted $30.25 million earmarked for those deals to the West Tennessee megasite development that has failed to attract an anchor tenant.

Critics point to those developments as proof of the program’s failure.

But the Department of Economic and Community Development leadership paints a different picture, saying the program has lured major corporations to relocate and create jobs in Tennessee in deals with clawback provisions that protect taxpayers. The capital grants come with a substantial upfront cost, ECD Commissioner Bob Rolfe acknowledges, but that initial price tag paves the way for a company to continuing expand and add jobs over the long term.

The capital grants are used to build infrastructure, prep a development site and provide equipment for a company expanding or relocating to Tennessee. The grants can be as small as $8 million for the Beretta plant in Gallatin, or as large as $209 million for the Volkswagen project in Chattanooga.

"The capital grant program when I look at historically what it meant for VW, and Hankook and GM and Nissan and Volkert, I would submit those have been incredibly successful projects," Rolfe said. "I share that with you because we do not debate that the cost of phase one is always going to be a very significant expense. And we're playing for more phase two, phase three, phase four where those costs per job go way down."

Tennessee and its local government partners have allocated $938 million for 13 capital grants since the fiscal year 2009. Three of those projects didn't come together. ECD, with support of the General Assembly, allocated funds, but the companies never actually moved to Tennessee.

Of the 13 capital grant projects reviewed by the Tennessean, nine have hit their job creation promises or are on track to do so. Since 2009, the projects that received capital grants have generated 5,910 jobs, according to data provided by the state.

The failed capital grant projects were for CVMR, a metal refining and manufacturing facility announced for Oak Hill; Horsehead Corp., a zinc recycling company in Rockwood, and a mystery manufacturing company that was never revealed. Instead of returning the $30.25 million approved for those projects to the state budget, ECD rerouted the funds for the megasite project in West Tennessee.

To date, the state has spent $140 million on the megasite, including the $30.25 million in transfers. The plan is to spend another $80 million, Rolfe said.

“This is one of the issues why people just don't trust government. They allot the money for a certain cause and said, 'OK, these three businesses, we're going to give them millions of dollars because we feel like it's going to be a good investment.' Obviously these did not pan out, and you'd assume if it doesn't you'd just put the money back in the general fund because that would make the most sense.”

The $30.25 million in transfers to the megasite were approved by the State Building Commission, an under-the-radar board consisting of the governor, the speakers of both legislative chambers and the state’s constitutional officers.

Critics say capital grant campaign is an example of government lacking transparency and corporate welfare costing taxpayers money.

Mark Cunningham, a spokesman with the Beacon Center, a nonprofit government watchdog group, praised ECD for improving its transparency on its incentive program, including adding an incentive tracking page to its website. But Cunningham said the three failed projects demonstrate the capital grant program is not working optimally. He said the $30.25 million should have been returned to the general fund to be spent on public safety officers, roads and schools, not shifted to the megasite.

"This is one of the issues why people just don't trust government," Cunningham said. "They allot the money for a certain cause and said, 'OK, these three businesses, we're going to give them millions of dollars because we feel like it's going to be a good investment.' Obviously these did not pan out, and you'd assume if it doesn't you'd just put the money back in the general fund because that would make the most sense.

"But they completely disregarded the interest of taxpayers and the interest of transparency by saying, 'Instead of putting it back to the general fund to be spent on things we need — whether it's roads, police, anything — we're going to give it to a horribly failing program in the West Tennessee megasite."

Gov. Bill Haslam's administration inherited the megasite project, for which the land was acquired 12 years ago under former Gov. Phil Bredesen's administration. The goal has been to attract a major auto manufacturer and its ancillary businesses. But the work of clearing the 4,100 acre site has been complicated by local and regional opposition over a planned wastewater treatment plant.

Instead of a plant that would discharge water into the nearby Hatchie River, the megasite will acquire easements to lay an 18-inch pipe that will send the water 85 miles away to the Mississippi River.

“The remaining item left is getting the easements from the megasite to the Mississippi and I think to date 43 percent of the easements have been signed and granted, which tells you we still have some work to do,” Rolfe said, adding that the state is actively marketing the site internationally. “We are hopefully going to be able to complete that last remaining item somewhere in the early part of 2018.

"When you look at the site and the layout it actually has the wherewithal to host more than just one company. And I think what we would envision is it would be something automotive related and their ecosystem of supplies would be in very close proximity also on the megasite."

Cunningham said he was especially troubled by the fact that three of the 13 capital grant projects, or 23 percent, never came to fruition. That doesn't include the $150 million in capital grants allocated for the Hemlock semiconductor project in Clarksville, which never fully came to fruition. The property was repurposed to accommodate other companies at the site.

"The first thing you need to look at is whether this program should even exist," Cunningham said. "If a business were to fail on 20 to 25 percent of their deals and they were to just fall through, then that company would probably go out of business.

"Ultimately this program has been a failure by any standard."

ECD Chief Operating Officer and Deputy Commissioner Ted Townsend pointed out the repurposing of the grant dollars was approved by the state building commission. He said the megasite expenses for which the $30.25 million was transferred were planned and mapped out well in advance.

"We had development-related projects that we needed to commence on the megasite," Townsend said. "Rather than go to the administration or the General Assembly with requests for those funds, since we already had those approved by the General Assembly and appropriated, we decided to transfer those amounts to cover the development on the megasite-related project."

Reach Nate Rau at 615-259-8094 and Follow on Twitter @tnnaterau.

Tennessee Capital Grants Program (since 2009)

13 projects for companies expanding or relocating to Tennessee

5,910 jobs created so far

$938 million in capital grants for infrastructure, land acquisition, site prep

3 projects never materialized

1 project, West Tennessee megasite, still under construction

$30.25 million transferred from failed projects to megasite

$73,941 per job commitment (for nine projects that have come to fruition)

Source: Tennessee Department of Economic and Community Development

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