Chattanooga: VW incentives could top $400 million over 20 years

State and local incentives for Volkswagen AG’s estimated $1 billion investment in Chattanooga could top $400 million over the next 20 years, according to available figures, but Gov. Phil Bredesen said Tuesday officials won’t know actual costs until later.

Calling the incentives a “fairly complicated package,” the governor said that because Volkswagen still is designing the auto assembly plant, total infrastructure costs remain unclear.

“It’s competitive with what other states are offering,” Gov. Bredesen told reporters of tax, training and development incentives after the German auto manufacturer’s announcement it is building the new plant at Enterprise South industrial park. “I don’t have a dollar figure to put on it right now.”

But he noted that each of the 2,000 manufacturing jobs is expected to generate an additional six to seven jobs from employers.

“This is a really good anchor for economic development all through Southeast Tennessee and certainly, I hope, ultimately all through Tennessee,” he said.

Tennessee’s chief economic recruiter, Economic and Community Development Commissioner Matt Kisber, and Revenue Commissioner Reagan Farr confirmed that VW’s $1 billion investment and estimated 2,000 employees will be sufficient to qualify for the state’s “super” job tax credit.

That provides a $5,000 corporate credit for each worker for up to 20 years. In today’s dollars, that alone could provide $200 million in state tax breaks over the next two decades.

Meanwhile, city and county officials have indicated they would offer the 1,350 acres at Enterprise South to Volkswagen at no cost as they did in an unsuccessful bid for a Toyota plant last year.

The land normally is sold at $60,000 an acre, making the total value of the property gift to VW $81 million.

Chattanooga Mayor Ron Littlefield also said the city and county have agreed to offer VW property tax breaks over the next decade. But the specifics of any such agreement must be authorized through a local industrial development board and approved by the city council and county commission.

If Volkswagen is provided the same level of property tax breaks given for major projects such as the BlueCross BlueShield building in Chattanooga, VW should save well more than $100 million in property tax bills over the next 10 years.

As a major manufacturer, Volkswagen also will qualify for several million dollars in growth credits and low-interest loans from the Tennessee Valley Authority through EPB and from the Chamber of Commerce’s business incentive program.

Other state tax, development and job training incentives further could swell Tennessee’s incentive package.

Earlier this year, the General Assembly at Gov. Bredesen’s urging squeezed $100 million from various state reserves for an economic development fund to help with several economic prospects including Volkswagen. But Mr. Kisber said “we’re still in negotiations” on many incentives.

The state also will help Volkswagen with education and training of its workforce and other tax incentives, although officials said the costs of such aid and tax breaks still are being figured.

Neal Wade, director of the Alabama Development Office, credited Tennessee officials for “doing a great job” landing the Volkswagen plant.

He said Alabama had offered incentives that included $205 million for site development of a cotton field selected by Volkswagen’s site consultants. He noted that Tennessee had somewhat of an advantage in that Enterprise South had been worked on to a large degree.

Alabama also offered an estimated $114 million in statutory incentives and $65 million for job training and construction of a training center, Mr. Wade said.

Mr. Wade and Mr. Farr agreed that there was no bidding war between the states over incentives.

Stefan Jacoby, president of Volkswagen Group of America, said Tuesday that Volkswagen did not pick its U.S. site based strictly on which city put up the most money.

“I don’t want to talk about this, and I will not talk about this,” he said when asked about incentives during a news conference Tuesday. “But to tell the truth, the incentive package was not the decisive factor to make this decision. Incentives are maybe a carrot, but they are not why we are coming to Chattanooga.”