Tennessee Gov. Bill Lee delivers his inaugural address after taking the oath of office in War Memorial Auditorium Saturday, Jan. 19, 2019, in Nashville, Tenn. (AP Photo/Mark Humphrey)

Updated at 9:24 p.m. on Monday, March 4, 2019, with more information.

some text
Rendering contributed by Volkswagen / Volkswagen's MEB platform for its planned electric vehicles features a skateboard look for the battery system that sits at the bottom of the chassis.

NASHVILLE — Tennessee Gov. Bill Lee's proposed $38.55 billion budget for 2019-2020 includes a $50 million state cash grant for Volkswagen's planned $800 million electric vehicle plant in Chattanooga.

Lee released his recommended state spending plan Monday evening during his first annual State of the State address to the General Assembly.

Meanwhile, the city of Chattanooga is putting up $2.5 million and Hamilton County is matching that figure with another $2.5 million in local incentives for the new Volkswagen electric vehicle facility, which is expected to add another 1,000 workers to the existing plant operations.

That's a total of $55 million for direct incentives in the project. VW already employs 3,800 workers who make the Passat sedan, the Atlas sport utility vehicle and, soon, a five-seat version of the SUV.

The incentives deal was struck by the previous Bill Haslam administration late last year, and Lee wholeheartedly agreed to it, but details were not known until the release of the budget.

His proposed budget also includes $60 million for another last-minute incentive agreement struck by then-Gov. Bill Haslam with Amazon for an operations hub expected to create 5,000 jobs in Tennessee, which Haslam at the time called "the single largest jobs commitment made by a company in Tennessee's history."

State Rep. Robin Smith, R-Hixson, whose district includes the Volkswagen plant, said about the VW grant that, "I don't anticipate any problems in seeing it through only because I think Volkswagen has proven to put its money to good use. I think they have turned around and invested back in our state."

House Finance Vice Chairman Patsy Hazlewood, R-Signal Mountain, said the expansion is "important, obviously for our area but also for the state as well. Particularly with the electric vehicle, there's such an opportunity to be on the front edge on that. And there's a whole new technology design, all of that. [We] have an opportunity to sort of lead the way on that. VW's done a great job of living up to their commitments."

At the electric vehicle facility, the first battery-powered vehicle to be assembled will be an SUV. It's expected to come off the assembly line in 2022, according to VW.

Volkswagen Chattanooga spokeswoman Amanda Plecas said the new electric vehicle facility is in the planning phase.

"Right now we are engineering the infrastructure, the building and the process equipment," she said. "We're also putting together packages for bids."

VW already is the most richly incentivized company ever in Tennessee, having received more than $800 million in federal, state and local perks since landing in the Volunteer State in 2008.

A new study recently showed that Volkswagen's Tennessee footprint supports about 16,400 jobs in the state through the automaker's Chattanooga assembly plant, supplier network and other impacts.

Lee's proposed capital project spending, which like the economic development grants would need legislative approval, includes:

* $19.7 million for the proposed Tennessee College of Applied Technology and Cleveland Higher Education Center in McMinn County. State dollars account for $14.23 million, while other sources total $3.51 million.

Rep. Mark Cochran, R-Englewood, said he's "very excited" about the proposal that would put the local TCAT, Cleveland State and several other education-related entities on a single campus. "I do believe it fits in well with the governor's initiatives. This is just going to do so much for economic development in the 23rd House District."

* New Fall Creek Falls State Park Inn: The governor is recommending $11 million in state funds to construct a new inn at the park. The Haslam administration tore down the existing inn, saying it was in poor condition.

* University of Tennessee at Chattanooga: UTC would get $3.61 million for campus pedestrian walkways, with $3.31 million from state school bonds and $300,000 from the university's institutional funds.

* Chattanooga State: Would receive $1.89 million to modernize its Center for Engineering, Technology, Arts & Sciences building and another $660,000 for gym roof system replacement.

* Cleveland State would get $250,000 for a technology building roof replacement.

Contact Andy Sher at or 615-255-0550. Follow on Twitter @AndySher1.

Contact Mike Pare at 423-757-6318 or