Matt Kisber

NASHVILLE — With Volkswagen AG’s management board reportedly making a recommendation next week on where to locate its new U.S. auto plant, state officials on Monday approved spending $1.25 million for site improvements at Hamilton County’s Enterprise South industrial park.

Volkswagen officials have named Tennessee, Alabama and Michigan as prospects for the plant and Chattanooga’s Enterprise South, which VW officials have toured, is believed to be one of the top candidates along with a site near Huntsville, Ala.

State Economic and Community Development Commissioner Matt Kisber declined to say whether the funds, approved by the State Funding Board, are specifically associated with efforts to persuade Volkswagen officials to locate the plant in Chattanooga.

“You know we don’t comment on our ongoing project activity,” Mr. Kisber said.

During the board’s meeting, Mr. Kisber, Tennessee’s top economic recruiter, said he considered Enterprise South “a very important industrial site for the state of Tennessee, one of our megasites.”

“In response to suggestions from site-selection consultants whom we have taken to visit the site in our efforts to market it with the Chattanooga Chamber and the local community, we received feedback that suggested the site needed to have some site work done to make it more marketable,” Mr. Kisber told the panel.

He said “that includes clearing a portion of the site that is considered to be the most likely location for industrial activity.”

With little comment, State Funding Board members quickly approved the $1.25 million expenditure from the state’s FastTrack program, which enables state officials to move quickly on certain economic infrastructure needs.

The total costs of the most recent site preparations at Enterprise South are pegged at $1.8 million, according to a request letter Mr. Kisber sent earlier to the Funding Board. The remaining costs would be borne locally, but the commissioner said “in-kind expenditures” made by Chattanooga and Hamilton County governments on site preparation would count.

County vehicles and employees have been seen at the Ooltewah-area property in recent weeks as workers move to clear land and relocate a stream.

Hamilton County Mayor Claude Ramsey said in a voice message that the local share comes to about $535,000.

“That’s in-kind,” he said.

Volkswagen is expected to make a site decision this month. Thomson Financial, citing an article to be published in the German magazine Auto Motor und Sport, reported that Volkswagen’s management board is set to decide on the site a week from today.

The plant could bring an estimated 2,000 jobs to Chattanooga while new factories operated by automotive suppliers could bring that many or more jobs to the region, experts have said.

Depending on the size of Volkswagen’s investment, Tennessee may have a new enticement as a result of a change quietly made to the state’s economic incentive package in this year’s legislative session.

An existing state job tax credit provides a $5,000 tax credit over a period of years for a company investing at least $1 billion and creating 1,000 jobs in Tennessee. The change extends the tax credit to an “integrated supplier” for a company investing $1 billion and would apply regardless of the supplier’s investment. But the duration of the credit would be shorter than it is for a company making the $1 billion investment, according to the law.

“When you have a company that’s investing in a site in excess of a billion dollars, they tend to have suppliers and ancillary activities and potentially customers that want to locate in close proximity,” Mr. Kisber explained in an interview. “We found this is another effort to induce those activities to be in the state and hopefully in proximity to a billion-dollar-plus investment.”

State Revenue Commissioner Reagan Farr said the change would allow suppliers to “piggyback a little bit on that investment.”

Some figures have cited the cost of the Volkswagen plant at $1 billion or more. But the German magazine cited by Thomson this week pegged the cost of the plant at 500 million euros which, according to a Yahoo.com currency converter, comes to about $787 million.