Chattanooga: VW incentives, investment records in state

Volkswagen’s planned $1 billion Chattanooga plant is the biggest single investment ever made in Tennessee by a company and is drawing the state’s largest-ever incentives package, officials said Friday.

“This is an economic anchor for a three-state region,” said Matt Kisber, commissioner of the state’s Department of Economic and Community Development.

People living in Georgia and Alabama will benefit as well, he said.

State and local governments are offering about $577.4 million in assistance and tax breaks to Volkswagen Group of America over the next 30 years to build the auto assembly plant, officials said.

But a new study concludes that benefits from the VW plant and the supply businesses it will draw to the region easily will exceed the record-setting incentives by spurring more than $11.8 billion in personal income growth over that period.

The study by the University of Tennessee’s Center for Business and Economic Research also estimated new total tax revenue of nearly $1.4 billion from the plant and its offshoots.

The plant and spin-off companies are expected to create 11,477 jobs, according to the study.

Salaries for the 2,000 jobs at the plant alone are projected to average $68,000 a year including benefits, or $136 million annually, said William Fox, who directs the UT center.

State and local governments will recover their investments in a little more than a year after the plant is up and running, Dr. Fox said.

The center took “a very conservative approach” to estimating the economic impact, he said.

“If this project is successful and expands, the region could see an even more-pronounced benefit,” Dr. Fox said.

Incomes boosted

Mr. Kisber said the analysis shows the VW plant will boost incomes in the region by $511 million annually and create more than $55 million in annual new tax revenues for state and local governments.

“This third-party analysis shows Volkswagen’s investment in Tennessee will bring a significant economic benefit to both the people of Tennessee and the Chattanooga region,” he said.

Also on Friday, Mr. Kisber asked the State Funding Board for approval to release $80 million in state incentives money to help ready the building pad at Enterprise South industrial park so VW can start pouring concrete in November.

“These are prudent, reasonable and justified investments,” he said in a meeting with reporters and editors of the Chattanooga Times Free Press.

Both Chattanooga Mayor Ron Littlefield and Hamilton County Mayor Claude Ramsey defended the assistance to be given the German automaker, which plans to build a 1.9 million-square-foot plant by early 2011.

“The project has great potential,” Mr. Ramsey said. “Over a period of time, there will be other opportunities that will happen.”

Mr. Littlefield said he has seen the big benefits auto plants have brought other cities, citing BMW in Greenville-Spartanburg, S.C., and Mercedes in Vance, Ala.

“The breakdown in benefits is conservative,” he said.

In 1993, Alabama provided $258 million in incentives to bring Mercedes-Benz to Vance, which at the time was an unprecedented financial offer for any business. But to recruit ThyssenKrupp to build a 2,000-employee steel plant in Mobile, Ala., the state and its local governments will provide $811 million in incentives.

Although VW’s initial investment will be somewhat less than Toyota and Kia plants now under way in the South, the VW facility also will be the North American manufacturing headquarters for Volkswagen and could lead to further expansions that might yield even bigger payoffs, Mr. Ramsey said.

Mr. Kisber said Tennessee’s incentives were enhanced significantly under Gov. Phil Bredesen, but he said the Volunteer State made an offer comparable to other states and that comparing announced incentives is difficult.

“Many states give money directly for a company project, which our constitution doesn’t allow,” he said. “We’re in the same ballpark as the other finalist states.”

VW projects it will produce at least 150,000 vehicles for the 2011 model year. It picked the 1,350-acre Chattanooga site over a similar-sized tract in Limestone County, Ala., near Huntsville.

The Alabama Development Office said Alabama offered VW a package of incentives valued at $381 million, including $205 million for the site and related infrastructure, $62 million for employee education at a new training center and $114 million from statutory and tax incentives.

Mr. Kisber said it took more money to prepare the sometimes rolling Enterprise South site than the flat location offered in Alabama.

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