Gestamp, the Spanish automotive company that’s expanding in Chattanooga to supply Volkswagen, is seeking to extend its tax incentive agreement to a site it has bought on Jersey Pike.
But a local activist said the proposal will take more property off the tax rolls, and the city and Hamilton County ought to suspend VW-related breaks until the automaker sorts out its emission scandal problem.
“I’d like to see a moratorium for six months,” said Helen Burns Sharp of Accountability for Taxpayer Money.
Today at a city Industrial Development Board meeting, Gestamp will seek to amend its 10-year payment-in-lieu-of-taxes agreement to include the 4120 Jersey Pike land it bought last month.
A Gestamp official has said the 29-acre tract, which formerly housed Brock Candy Co. and Farley’s & Sathers, will be a part of the company’s $180 million expansion which was announced in July.
The company plans to create 510 more jobs in Chattanooga as it builds onto its existing Hickory Valley Road plant, starts operation at Jersey Pike and constructs a new facility next to VW’s Chattanooga assembly plant.
Charles Wood, the Chattanooga Area Chamber of Commerce vice president for economic development, said Gestamp had planned to build part of its expansion on nine acres next to its existing plant.
But that tract has “soil issues,” he said, and moving the work to Jersey Pike will allow Gestamp to meet its time line to supply parts for VW’s new sport utility vehicle, on which production is to start in a little more than a year.
Wood said that adding the Jersey Pike property to Gestamp’s tax breaks won’t change the overall amount of the tax abatement that Gestamp will receive.
“The abatement terms are the same,” he said. “The only difference is that it adds a new address.”
But Sharp said that adding the Jersey Pike property takes more land off the tax rolls.
“I don’t see how the value of the incentive is frozen,” she said.
Sharp added there’s nothing in the proposed PILOT amendment to indicate there’s any kind of a swap between Jersey Pike and the nine acres.
Wood said that Gestamp eventually plans to build on the nine-acre tract, which was part of the original incentive package.
“Our hope is for substantially more than $180 million” investment by the company, he said.
Wood said the estimated value of the 10-year tax incentives to Gestamp is $8.4 million.
But, he said, new school taxes paid by Gestamp over that time period is expected to total $5 million. Also, new taxes paid to the city and county are projected to equal $5.1 million during the period, Wood said.
In addition, an economic development fee Gestamp is to pay the city during the period is $2.5 million, he said.
Sharp said that in the aftermath of the VW emissions scandal, it may be wise for local government to slow down as it pertains to giving tax incentives to suppliers to the automaker.
She said that it “seems like it’s not good public policy” to grant new tax incentives for a supplier of a company with so many questions about its future.
“People don’t know how they will do,” Sharp said. She said that “I like Gestamp,” but that its operations slow when VW’s does.
VW admitted about two weeks ago that the company installed so-called defeat devices in software in some of its diesel vehicles in order to circumvent U.S. emissions tests.
Wood said there’s clawback language in the PILOT if Gestamp doesn’t make the intended investment or create the jobs. But, Sharp said there ought to be better clawback language in such agreements.
“This is serious money,” she said.
Gestamp, which started operating at Enterprise South industrial park in 2009, makes stamped parts and welded assemblies for the Passat sedan. The new plant will press body sheet metal and chassis components for the SUV.
Over the next 24 months, Gestamp plans to hire about 510 more workers in addition to the nearly 300 who already work for the company in Chattanooga. It’s making the biggest single investment ever by a VW supplier in Hamilton County, officials said.
Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318.