GE Power has agreed to pay Chattanooga and Hamilton County $6 million related to tax breaks earlier awarded to the former Alstom manufacturing operations in the city, which is now owned by GE.
GE is slated to pay $3.3 million to the city and $2.7 million to the county, about half the amount that was initially sought from the company, along with attorneys fees, officials said Thursday.
Chattanooga Mayor Andy Berke said the agreement is "a clear win for the city."
"It's the first time we've pursued a company [that] failed to meet its obligations," he said.
County Mayor Jim Coppinger said the settlement is "a good deal for us."
"There was no assurance we'd get anything," he said, even if the city and county had pursued court action against GE.
Karen Simons, senior counsel for GE Global Operations-Properties, said the company appreciated "the strong commitment shown by city and county officials to work together and arrive at a solution that is agreed upon by all parties."
The city and county had originally sought $13 million from GE for tax breaks awarded after a 2008 payment-in-lieu-of-tax (PILOT) agreement with France-based Alstom related to an expansion at its Riverfront Parkway facilities.
A little more than a year ago, GE bought Alstom's power operations and later announced it was closing the steam turbine manufacturing plant and two other adjacent facilities, eliminating nearly 235 jobs through year's end while offering benefit and severance packages. GE said it planned to keep about 50 people in Chattanooga.
Berke said the 2008 Alstom PILOT didn't provide "clawbacks," or specific language stating what the company would need to repay if it didn't carry out its expansion or hiring plans.
"When I came into office, one of the things we did is we changed our PILOTs so they clearly state what happens when companies don't meet their obligations," he said. "That's the best way to do these things, so there's no risk and uncertainty."
Berke said GE took the position that without some kind of specific provision in the PILOT, there may not be any obligation. GE also said the PILOT is not its commitment but was Alstom's, he said.
But, Helen Burns Sharp, founder of the citizens group Accountability for Taxpayer Money, said the city and county should be reimbursed the entire $13 million.
"Surely our elected officials will not accept anything less," she said. "If homeowners and small businesses get behind on our property taxes, we can't cut a deal to pay just a portion of what we owe."
Sharp said the 2008 PILOT language is clear enough that the $13 million was initially sought by city and county attorneys. She added that the fact GE bought Alstom while the PILOT was in effect has no bearing on the new owner's responsibilities, also citing the PILOT.
"This money should be reimbursed and earmarked for a special fund to address priority community needs," she said.
City Attorney Wade Hinton said litigation against GE could have been time-consuming. He said no matter who won the initial court battle, they likely would have appealed.
He said the expansive waterfront property will now return completely to the tax rolls.
"We're not paying a dime in attorneys fees," Hinton added, noting the city's legal staff was joined by Nashville attorneys.
Berke said the city plans to use some of its share for workforce development.
"We're planning on setting up a new office of workforce development," Berke said. "Some portion will be used as seed money."
Coppinger said plans are for the county's share of the settlement to go into its general fund.
"It's a fair deal for us," he said. "It's a fair deal for the city."
Moving ahead, Simons of GE said the company is "actively focused on working across the community and beyond to look for opportunities to put the property back in use."
About 35 years ago, the manufacturing site, then owned by Combustion Engineering, had nearly 6,000 workers and was Chattanooga's largest employer. It served as a maker of fossil fuel and nuclear steam generating equipment.
While the employee headcount fell sharply over the decades since, a revival was expected in 2007 when then-facility owner Alstom announced plans to build the $300 million plant to make new turbines for an expected renaissance of the nuclear industry.
However, shortly after the plant opened, an earthquake and tsunami hit Japan and its Fukushima nuclear plant in 2011. In addition, the energy market saw more of a demand for natural gas-powered plants, and the Chattanooga facility never reached its employment target.
Contact staff writer Mike Pare at email@example.com or 423-757-6318.
Update at 10:34 a.m. with minor fixes.