Chattanooga: Mayor Littlefield says VW worth the cost

Local money to prepare Enterprise South industrial park for Volkswagen could reach up to $80 million before the plant even is built, but officials say the investment is worth it.

“We didn’t give away anything we couldn’t or shouldn’t,” Chattanooga Mayor Ron Littlefield said.

The city of Chattanooga already has spent $10 million and could spend up to $40 million to prepare the site for VW, Mr. Littlefield said. On Tuesday, the City Council approved a $40 million bond issue to pay for site improvements, although officials said they expect to spend only about $20 million.

Hamilton County Finance Director Louis Wright said the county is looking at about $20 million on top of the $10 million already spent, “but we’re still in the looking stage.”

The money is expected to pay for a proposed welcome center, a fire station, a training center, rail improvements, road, sewer and telecommunications lines, city records show. The 1,350-acre VW site sits within Chattanooga city limits, but it is owned jointly by the city and Hamilton County.

To lure VW, local officials also agreed to give up property taxes that VW would have paid over a 30-year period, Mr. Littlefield said. Volkswagen still will pay the education portion of the property tax — about $5.5 million annually, Mr. Littlefield said, but that money will go to the county, which runs the school system.

“We can just assume the city doesn’t get anything for 30 years,” he said.

The city and county will recoup some of its investment, he said, through property taxes and sales taxes paid by VW suppliers that locate within the city and county. Officials also expect money from investments in hotels, retail stores and housing, he said.

“It fuels a growth in the overall community,” Mr. Littlefield said. “That is what it was all for. I think the benefits will come in a lot quicker than expected.”

Jill Bratina, spokeswoman for VW, said there are a number of programs and infrastructure grant items that make up the city and county proposals and are part of the agreement.

“These funds will help ready the site and ensure the success of our project over the long term,” she said. “As we’ve said since the announcement, this is a partnership and we appreciate the commitment from the city and county, and we can assure that these are dollars well spent.”

City Council Chairwoman Linda Bennett said council members didn’t approve the $40 million bond issue without understanding its implications.

“It is a large investment, and we know that,” she said. “It’s always a big hit on the front end.”

City Chief Financial Officer Daisy Madison said the city will be able to absorb the costs of the bonds by retiring old debt and through new tax revenues created from suppliers.

Mr. Littlefield said the city does not plan to “spend more” than the $40 million.

In Tupelo, Miss., where a Toyota plant is being built, $67 million was spent on site preparation and $136.6 million on infrastructure, which includes things such as electricity, water, sewers and telecommunication lines, according to Toyota. In West Point, Ga., where a Kia plant is being built, $21 million was spent for infrastructure, according to the Georgia Department of Economic Development.

State officials declined to release details about the incentives package offered to VW, and they said a study of the economic impact to the region is being conducted by the University of Tennessee.

Estimates of government incentives based upon Tennessee tax laws and preliminary offers could top $500 million from local and state governments. The state has said in the past that VW’s annual payroll is expected to be more than $100 million, and the total economic benefit is expected to top $600 million a year.

The Volkswagen investment also could create up to 14,000 jobs in the region, according to news reports.