Tennessee business recruiters have already offered most of the $100 million that Gov. Phil Bredesen wants lawmakers to set aside next year for incentives to recruit new manufacturing and corporate headquarters to the Volunteer State, Gov. Bredesen said Tuesday.
“One of the bright spots in all this right now is that the pipeline has never been fuller” of potential businesses being recruited by Tennessee’s Department of Economic and Community Development, Gov. Bredesen said. “There’s a lot going on right now — some of it right here in Hamilton County.”
Gov. Bredesen said Tennessee has upgraded its incentives to compete with other states and the $100 million he proposes for the next fiscal year may be needed to meet the pledges already offered to business prospects.
“We’re almost never the highest in these competitions, but we’re very much in the game,” Gov. Bredesen said.
The governor refused to comment on the state’s chances of landing an automobile assembly plant being planned in the United States by Volkswagen.
Asked about Tennessee’s chances for luring the German automaker to the Volunteer State, Gov. Bredesen said, “I would rather just totally stay away from that subject.”
“I have to be very careful about what I say about this,” he said. “But I would certainly say on this $100 million (for incentives in the budget), the delegation from Hamilton County really, really ought to think long and hard about helping us with it.”
return on investment?
However, creation of the $100 million economic contingency fund at a time of massive budget cuts drew fire in the House Finance Committee from Rep. Nathan Vaughn, D-Kingsport. He demanded officials provide information on what type of return on investment the state would see.
“When we say the budget’s falling out (of state government) and then we say we got $100 million in there for economic development, I would expect there to be some targets as the expectations of revenue generation,” Rep. Vaughn said.
Finance Commissioner Dave Goetz said officials working on the prospective companies “understand a whole lot more than that about it. But if I were to talk about that in this hearing, we wouldn’t need that $100 million because they wouldn’t come.”
In comments later made to reporters, House Speaker Jimmy Naifeh, D-Covington, voiced support for the $100 million fund.
“You know, I grew up with Gov. (Ned) McWherter as my mentor over the years and the things he talked about were good education, jobs and roads. This means jobs, and yes, I think it’s something we need to do.”
Volkswagen announced in April it had narrowed its site selection for an auto plant to either Tennessee, Alabama or Michigan. Chattanooga’s Enterprise South industrial park is one of the megasites certified by a TVA consultant as ready for immediate development by an automobile manufacturer and analysts say it would make a good candidate for VW.
VW is expected to announce its plant decision by mid-July.
Chief Executive Officer Martin Winterkorn told the business daily Handelsblatt the company is “examining options of whether we could produce the next Audi SUV generation together with our own vehicles.”
But the new editions of the Audi Q7 and Porsche Cayenne SUVs would not be able to be produced in the U.S. before 2015, the paper said.
incentives — promised or budgeted
Gov. Bredesen said some offers have already been made to a potential major new business.
The business incentives offered to VW and other prospects are within the state’s existing laws, which have been modified over the past decade to allow for more training and infrastructure spending by the state.
But unlike some previous recruitment campaigns that relied upon promises of future state funding, Gov. Bredesen said in the current economic environment it’s critical to have the money for state incentives already budgeted.
So while the Bredesen administration is laying out plans this week to cut another $468 million from next year’s budget, the governor said it is critical to keep $100 million for economic incentives.
“With these kind of pullbacks, we’re much more likely to get positive decisions if prospects can see the money is there and is not relying upon the Legislature to act in a very tough budget year,” he said.
Most of the incentives relate to investments in worker training, roads, sewers and other infrastructure that will benefit the state and its workers long after any single business has built or even closed a plant, the governor said.
“We’re trying to make our incentives do double duty,” he said.
The governor defended the cost of such incentives, especially for major new industry.
“We basically make that money back on the sales tax from construction,” he said. “That’s money you get back pretty quickly.”