VW spends most of $235 million in infrastructure aid

VW spends most of $235 million in infrastructure aid

October 12th, 2011 by Mike Pare in Business Around the Region

Train cars sit near a lot at the Volkswagen plant waiting to be loaded for transport to dealers.

Photo by Angela Lewis/Times Free Press.

PUBLIC MONEY FOR VOLKSWAGEN

Key funds provided for the VW project by city, county and state:

$79.6 million: site development (state)

$70 million: infrastructure (state)

$40 million: training center (state)

$39.3 million: plant infrastructure (city/county)

$6 million: welcome center (local)

Source: City Industrial Development Board

Volkswagen's assembly plant project has burned through nearly all of the public funding pledged to it three years ago as a part of the incentive package to lure the automaker to Chattanooga.

Officials said Tuesday that about 96 percent of the more than $235 million in infrastructure, training and other money earmarked for the project is either spent or encumbered.

The plant that officially opened in May was provided the funding as a portion of the estimated $577.4 million incentive package of federal, state and local assistance and tax breaks offered to VW. The sum is a record for an auto plant in the United States.

Officials said spending is on budget, and they'll likely take several months wrapping up contracts related to the biggest single manufacturing project ever in Hamilton County.

"We've really tried to be careful about everything we spent," said Steve Leach, the city's public works administrator, at a meeting of Chattanooga's Industrial Development Board. The panel was charged with overseeing the $235 million, which accounts for nearly all of the public infrastructure spending for the $1 billion plant.

City Engineer Bill Payne, asked by board member Ric Ebersole if all the public money will be spent, said that's likely to be the case.

Tidying up

He said work on VW's welcome center to be located near Interstate 75 hasn't started yet, and some $6 million is earmarked for it.

Payne said everything outside the welcome center generally is accounted for.

"There's still some pending projects being considered," he said.

In this file photo Jim Coppinger speaks to reporters after taking the oath of office to become Hamilton County Mayor on Jan. 11, 2011.

Photo by John Rawlston/Times Free Press.

Hamilton County Mayor Jim Coppinger said the public money was worth spending, citing the more than 2,000 workers hired by Volkswagen and hundreds of other jobs added by VW suppliers.

"That has played out significantly," he said, adding that 90 percent of the production slots at the plant were filled by county residents. "The commitments VW made, it has fulfilled those."

Richard Beeland, spokesman for Chattanooga Mayor Ron Littlefield, termed the project "a great investment for the city."

Leach said the city is looking forward to another challenge if VW decides to expand the factory.

"It's just a rare opportunity to have this kind of facility that has this kind of expansion opportunity," he said.

Coppinger added that the public spending on the project is on budget.

"It has been done very effectively," he said. "We're pleased Volkswagen is up and running and that there could be an expansion."

Other tax credits

While the plant initially was built to produce 150,000 vehicles a year, officials have said it could be enlarged to make more than 500,000 units.

The $577.4 million in incentives also includes jobs and machinery tax credits awarded by the state valued at over $104 million. Local payment in lieu of tax agreements for VW were put at about $133 million, figures show.

Tuesday, the industrial development board approved a couple of new contracts, including spending up to $98,387 for the purchase of additional equipment from Chattanooga-based Walter A. Wood Supply Co. Inc. for the Volkswagen Academy, which is the training center on the VW property.

"That training center has been very active," said Ted Mills, the board's chairman.

Payne said the training center equipment will be paid for from the state's portion of the funding.

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