Tennessee among top megadeal states

Tennessee among top megadeal states

June 21st, 2013 by Mike Pare in Business Around the Region

Volkswagen recently completed a massive sign atop its body shop.

Photo by Dan Henry/Times Free Press.

TOP STATES

Among states with megadeals of $75 million or more in the past 37 years and the number:

* Michigan, 29

* New York, 23

* Ohio, Texas, 12 each

* Tennessee, Louisiana, 11 each

* Alabama, Kentucky, New Jersey, 10 each

* Mississippi, North Carolina, Missouri, 8 each

Source: Good Jobs First

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Tennessee is ranked in a new report as among the top states nationally in the number of "megadeals" in which it has provided companies with large subsidies for economic development projects.

Michigan ranked first with 29 megadeals of $75 million or more while Texas was the top Southern state with 12 over the past 37 years.

Tennessee followed with 11 while Alabama had 10, according to the report by Washington, D.C.-based Good Jobs First. Georgia recorded five megadeals, the report said.

The deal to lure Volkswagen to Chattanooga was the largest in Tennessee at $554 million in state and local subsidies, the report said.

Also, three Tennessee economic development projects involving Japanese automaker Nissan, including the relocation of its North American headquarters, were cited in the report, with total subsidies reaching $528 million, according to the study.

Kasia Tarczynska, a co-author of the report, said Tennessee offers expansive subsidy programs to companies. She cited the state's tax credit programs related to jobs and training.

"Tennessee is very aggressive in this arena," she said.

Tarczynska termed the headquarters relocation subsidies by the state "one of the more controversial," saying it offers up to $50,000 per job for simply moving positions from one state to another, for example.

Still, officials say Tennessee and Chattanooga are competing with other locations for such megaprojects, which often generate lots of jobs and payroll.

Ron Harr, the Chattanooga Area Chamber of Commerce's chief executive, cited a recent report funded by the business group about the economic impact by VW.

"Volkswagen has more than lived up to its commitment," he said.

That report, released this month by the University of Tennessee Center for Business and Industry, said that by the end of 2012, VW had hired 2,415 direct employees with an annual payroll of $159.2 million and helped create another 9,985 jobs in the state.

Dr. William Fox, who heads the UT center, said that because of indirect and multiplier effects, additional income for people employed by other companies totals $483.9 million. He also estimated that VW increases state revenues by $31.2 million annually and local coffers by $22.3 million each year.

"We clearly see in every aspect of Chattanooga the impact the firm is having," Fox said. "Automobile plants are uniquely important in terms of their economic impact."

At the same time, this spring VW laid off 500 temporary employees amid slower than expected growth for its Chattanooga-made Passat.

Tarczynska said the Good Jobs First report shows that the megadeals offered by states are becoming more numerous and costly.

"The number of subsidy packages is growing and the price tags are rising," she said. "Incentive packages are out of control."

At times, Tarczynska said, that's money not going to schools and firefighters.

"A lot of companies are abusing the situation, knowing states are competing with each other," she said. "They demand more money from those localities."

Twenty-nine companies received two or more megadeals over the period, the report said. General Motors tallied the most with 11, followed by Ford Motor with nine, and Intel with six. Boeing, Daimler (including Mercedes), Nissan and Toyota had four deals each.

The report noted that Volkswagen in 1976 received an estimated $100 million in incentives to put an auto assembly plant in Pennsylvania. The factory closed about a decade later amid slow sales.

Harr said that there is "a new automotive South" with Chattanooga at the center of that map.

"Volkswagen has put us on the map with automotive suppliers, and the Chamber is launching a new marketing effort to brand Chattanooga as the center of the new automotive South."

Also this month, Hamilton County Mayor Jim Coppinger and Chattanooga Mayor Andy Berke made a trip to VW headquarters in Germany with state officials to try to convince the automaker to make a new sport utility vehicle in Chattanooga.

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318.