HomeServe USA won a tax break from a Chattanooga panel Tuesday for an expansion, though the company drew fire from a board member over allegations that it misled customers in other states.
"There needs to be some consideration that if we give [Payment in Lieu of Taxes] agreements to companies, there ought to be some corporate responsibility requirement that comes with it," said Industrial Development Board member Jimmy Rodgers.
Rodgers cited a Washington Post article from September 2016 that said HomeServe, which sells monthly household repair plans to homeowners, has paid more than $400,000 to settle allegations of misleading consumers in six states.
In 2015, HomeServe paid $115,000 to Maryland's Consumer Protection Division after its attorney general said residents were "tricked" into signing up for a HomeServe plan "they might not have needed."
Also, the story said, HomeServe signed agreements between 2010 and 2015 with attorneys general or state officials in Georgia, Kentucky, Ohio, New York and Massachusetts. All of those came amid investigations into the firm's marketing materials, among other complaints, the story said.
Myles Meehan, HomeServe's senior vice president of public relations, said there was no admission of fault in the agreements nor any administrative finding of wrongdoing.
"They're just settlement agreements for settlement only," he said. "There's nothing in the agreements about the quality of service we provide our customers."
Meehan said the allegations had to do with some marketing materials it used seven years ago. He said that the Better Business Bureau in Connecticut, where HomeServe USA is based, gives it an A+ rating.
But Rodgers also cited a large fine against HomeServe's operation in Great Britain.
According to a 2014 story in The Guardian, HomeServe was handed a record $38 million fine for mis-selling its policies and mishandling customer complaints between January 2005 and October 2011.
British regulators said staff at the firm had focused on the "quantity not quality" of sales to the detriment of customers, many of whom were vulnerable older people, The Guardian reported.
HomeServe Chief Executive Richard Harpin said in 2014 that the company has "transformed the business, rebuilding and strengthening the management team, retraining staff and restructuring systems and controls."
The Chattanooga panel voted 4 to 1 in favor of the property tax breaks for HomeServe, with Rodgers dissenting from the majority. The city council and Hamilton County Commission already have approved the property tax break for HomeServe.
HomeServe, which employs 350 people in Chattanooga, plans to invest about $5.5 million for the construction of an East Brainerd office building. The company intends to hire almost 200 more employees.
The new 46,000-square-foot facility will go up on Lee Highway near Shallowford Road, where Meehan said work is expected to start this month.
Steve Hiatt, the Chattanooga Area Chamber of Commerce's director of existing business development, said the company started in the city in 2010 with just 35 employees.
Hiatt said the five-year property tax break provided $175,000 worth of incentives to HomeServe. New taxes receipts generated by the project to the city and county, however, are expected to hit $246,000. Also, there will be $132,000 in new school taxes, he said.
Hiatt said that every dollar given in the incentives is worth about $15 in spin-off revenues.
"I've never seen it that high," Hiatt said about the return. "It's very beneficial to the county."
Also, he said, the HomeServe expansion was wooed by three other cities - Rome, Ga., Lexington, Ky., and Florence, S.C. Hiatt said the incentives offered by Lexington averaged $8,000 per job while that figure was $1,600 per job in Chattanooga, including $700 per job in state training incentives.
Meehan said the company picked Chattanooga because it already has operations in the city, which would be disrupted if it moved to another state.
"We were hoping Chattanooga sees there's a future with HomeServe," he said. "A little bit of tax incentive money helped the company make a decision."
Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318.