In a time of smaller business investment nationwide, Tennessee is leading the country in landing the biggest business deals.
Among the top 10 biggest business announcements in North America last year, two were in Tennessee, according to the annual report of such deals by Site Selection magazine.
The $1 billion Volkswagen auto assembly plant in Chattanooga announced in July and the $1.2 billion Hemlock Semiconductor Corp. polysilicon plant, which will make solar-panel components, in Clarksville, Tenn., announced in December were among only $3 billion business deals on the Site Selection list for 2008.
The February announcement of another $1 billion polysilicon plant by Wacker Chemical Corp. in Bradley County was the first $1 billion new business investment in 2009.
"There are fewer projects going forward in the current economy," said Adam Bruns, managing editor for Site Selection, a trade publication that tracks business locations and major deals. "But there are still some big projects being announced and Tennessee seems to be very successful right now in getting some of those."
None of the top business deals in 2008 were in Georgia. After landing the $1.2 billion Kia car plant in 2006, Georgia has not had a top deal in Site Selection's annual list.
But both Georgia and Tennessee should reap dividends from major new Tennessee projects even during the worst economic downturn in a generation, according to Tennessee's chief industrial recruiter.
"We're very fortunate to have had successes like Volkswagen, Hemlock and Wacker that now afford us the chance to recruit the suppliers to these plants and the downstream businesses they generate," said Matt Kisber, Tennessee's commissioner for Economic and Community Development. "We're seeing a lot of activity in those areas even though manufacturing overall is certainly down."
Mr. Bruns said spin-off benefits from new manufacturing plants are often overstated.
"But projects of the scale coming to Tennessee will certainly attract more businesses to the surrounding area," he said. "The message from what we're seeing is that big projects and their supporting investments still do occur even in tough economies."
Two weeks ago, Mr. Kisber said one prospect inquired about Tennessee after a site consultant didn't even recommend the Volunteer State.
"They wanted to look at Tennessee because they told us if companies like Volkswagen and Wacker are locating in the state, they wanted to make sure they see what we have to offer," he said.
tax breaks and debate
Mr. Kisber said his department has worked over the past six years to create tax and investment incentives for targeted industries and to coordinate state services for new business.
Under the Bredesen administration, Tennessee has added jobs tax credits and Fast Track grants to cut tax obligations for major new businesses and to fund roads, sewers and other infrastructure needs for a new plant.
Unlike other states, Tennessee also has a "jobs cabinet" that brings a team of economic recruiters and tax collectors to prospective businesses.
Such assistance has been costly for state and local governments, at least in the short term.
A state-funded study by the University of Tennessee's Center for Business and Economic Research estimates VW will get government assistance or tax breaks valued at $577.4 million in current dollars. In return, the UT study estimates VW and its suppliers will generate more than 11,000 jobs and ultimately produce more than twice as much in tax collections and more than 20 times more in personal income growth than what the government spends.
But Ben Cunningham, spokesman of Tennessee Tax Revolt, said Tennesseans will end up losing from giving away so many incentives.
"Yes, we're 'successful' in getting these businesses, but the price is just too high to justify what we are getting," he said. "The most outrageous thing is that these deals (for government assistance) are all cut in secret."
Mr. Cunningham claims the cost of the infrastructure assistance and tax breaks for major industry are borne by smaller businesses, which create most of the new jobs in the state.
Mr. Bruns said Tennessee was ready with major developed sites and targeted tax breaks when the automotive and solar panel industries came calling.
Volkswagen is building its 1.9 million-square-foot plant on part of the 1,600-acre Enterprise South industrial park that TVA designated three years ago as a megasite ready for major industry.
In its announcement of its decision to build a solar panel equipment plant near Cleveland, Wacker said TVA power rates were only half as much as what the company pays for electricity in Germany.
"There's no denying that the megasite program has made a real difference and one of the identities pushing that - TVA - has helped a lot, too," he said. "The fact that TVA is there with a varied power portfolio is something that end users like to hear."
Site Selection magazine also credited the Chattanooga Area Chamber of Commerce as one of the nation's top economic development groups for 2008, based upon its success in helping to recruit VW and other new businesses.
"Landing a 'Top Deal of the Year' did more than firmly entrench Chattanooga on the radar screen of corporate site selectors," Mr. Bruns said. "It solidified the southern Tennessee city as a force to be reckoned with in years to come."
Chamber President Tom Edd Wilson said Chattanooga spent many years and millions of dollars over the past decade to buy and prepare industrial sites and upgrade its recruitment efforts.
"It's not all been easy," he said. "But to be recognized as one of the leading economic development groups seems to validate the strategy of what we've been working to accomplish with the help of a lot of people."
In a separate list of the most competitive states for economic development in 2008 released last week by Site Selection magazine, Tennessee and Alabama tied for the seventh best state in the country.
Top states in 2008, according to the magazine, were Ohio, North Carolina, Michigan, Pennsylvania and Kentucky.
Although Tennessee landed two of the three biggest business investments last year, other states still generated more per capita business investment, number of projects and job additions, Mr. Bruns said.