This April 30, 2014, file photo shows the company logo of Alstom at the headquarters in Levallois-Perret, outside Paris, France.For the first time, Chattanooga and Hamilton County are demanding that a local business pay them back for a tax break it received because the company didn't meet its obligations under the agreement.
Mayors Andy Berke and Jim Coppinger said Wednesday that both governments are in a dispute with Alstom Power, which operates two facilities on Riverfront Parkway, because the plant didn't achieve its promise to add 300 new jobs by Dec. 31, 2014.
Neither mayor would go into detail about the negotiations. But Berke said the governments are talking with Alstom about how much money the company should have to repay and whether to continue the agreement through its scheduled end date in 2026.
"We've communicated to Alstom that the failure to meet their obligations is unacceptable and there needs to be consequences to that failure," Berke said at a news conference.
In 2008, Alstom entered a three-phase payment-in-lieu-of-taxes agreement, or PILOT, with Chattanooga and Hamilton County for its $300 million expansion in Chattanooga. The PILOT required the Paris-based company to add 300 new jobs and make $265 million in capital investments. In return, the city and county waived the company's property taxes, except for a small portion of the school tax. The waiver was for about 18 years.
But both of Alstom's facilities fell victim to slowdowns in two key power sectors and a year ago Alstom furloughed most of its then 335 workers for nearly a month. In February, the company again cut jobs, this time laying off 100 workers at its boiler services plant.
In Alstom's annual report to the Chattanooga Area Chamber of Commerce at the end of 2014, the company stated it had created only 140 new jobs. Berke said after that, the city and county attorneys sent a strongly worded letter warning Alstom it had not met its commitment.
According to the mayor, Alstom contends it doesn't owe any money.
An Alstom spokeswoman didn't return calls seeking comment. But in a prepared statement, Alstom pointed out that the company still has about 350 employees in Chattanooga and contributes $15 million to the local economy through its employee payroll and investments with local suppliers.
"Alstom is continuing its discussions with city and county leaders regarding the 2008 PILOT agreement and we remain dedicated to reaching a resolution that makes sense for all parties," the release states.
Both Chattanooga and Hamilton County have faced mounting pressure to reform the city's PILOT agreements and have been criticized for not keeping track of the $285 million in current commercial tax agreements.
Local government watchdog Helen Burns Sharp, who recently won a lawsuit against the city's bond board related to a different tax incentive, said Wednesday's announcement was a step toward government accountability.
"I am really pleased that the two mayors are enforcing the language in the PILOT agreement," Sharp said. "It might be nice if we could go back and get the others [businesses] that haven't met their agreements. But on the other hand, this is what they should be doing now."
Newer agreements now have claw-back provisions outlining what actions the governments can take if the business doesn't meet its obligations and education taxes are not waived anymore. But that wasn't the case in the past, which makes current negotiations with Alstom tricky, Berke said.
In March, Alstom offered to start paying 14 percent of the taxes it owes going forward, around $400,000 a year. But Berke said that wasn't a good enough offer.
Alstom's tax breaks for 2014 totaled $2 million, according to the city's website.
Another complicating factor is that Alstom is negotiating with General Electric Co. to purchase most of Alstom's power equipment business.
Coppinger said the governments face a tough balancing act to hold the company accountable without driving out any future owner from Chattanooga, losing local jobs.
"This is really a tightwire decision," he said.
Contact staff writer Joy Lukachick Smith at jsmith@timesfreepress.com or 423-757-6659.