Corporate courtship is not what it used to be

Monday, June 22, 2009 at 12:00am

UPDATE 3:45 p.m. Monday: Responding to the assertion that Williamson County won't soon be able to offer incentives on the scale of Nissan's, Economic Development Director Matt Largen said the county "considers each company relocation on an individual basis based on the merits of the particular project. This allows the county to maintain maximum flexibility to make a good deal that benefits the company and the citizens of Williamson County, even in these challenging times. Williamson County views economic incentives as investments that yield substantial long-term direct and indirect benefits and will continue to offer the program when the opportunity arises."


As orginally reported:

For the project’s supporters, much of the May Town argument has been couched in terms of regional sparring.

Developer Tony Giarratana has repeatedly pitched the project as the only way Davidson County can stop the flow of companies heading south for the suburban charm of Cool Springs. May Town, the argument holds, will keep such companies within the county lines and also attract out-of-state relocations.

Corporation courting is an increasingly competitive game. Cities and counties are now expected to come to the table with incentives in hand, offering up elaborate and expensive tax abatements and economic perks to lure businesses.

Middle Tennessee municipalities already are familiar with the stakes. Dell and Nissan each racked up high-dollar incentive packages from the state and local entities, and additional millions in tax abatements and other handouts have been swapped when businesses have set-up shop locally.

According to some, however, with a number of incentive deals already on the books, area municipalities, including Davidson County, could be realistically limited in their ability to offer the hefty packages potential transplants expect.

The question becomes, if we cut the ribbon on a $4 billion campus primed for corporate relocations, will the county be able — and willing — to provide the economic incentives these high profile businesses are looking to score?

According to Carlyle Carroll, vice president of economic development at the Nashville Chamber of Commerce, when outside businesses first begin to identify potential new locations with site selectors, economic incentives are on the radar. “They’ve got an idea of what’s available out there for corporate locations,” he said.

Tennessee, particularly under the Bredesen administration, has a well-earned reputation for offering incentives for new business. In terms of state incentives, most the of options open to new companies are based on job creation numbers and the amount of capital investment and include job training, infrastructure improvements and job tax credits.

On the county level, each entity essentially has the same number of options for incentives offerings.

One way is for a county to set up a tax increment financing district around the new headquarters, freeze the property taxes at their pre-construction levels, and then redirect the difference between the eventual new value toward infrastructure costs.

The second major option for a county is to issue tax abatements, or payment in lieu of taxes. In this set up, a county’s Industrial Development Board takes legal title of a new headquarters, thus rendering it tax-free. In lieu, the company pays a certain percentage of the taxes over a period of time.

Both Davidson and Williamson counties have been success fishing for new corporations with the available methods. Dell was lured to the Nashville area through a combination of state and local incentives totaling $160 million, including PILOT. The hulking $197.6 million incentive package handed over to Nissan to move to Franklin included a TIF district and $14.8 million in tax abatements.

However, according to local economic development officials, even though new corporations inspire indirect activity in a community, these multi-million deals do deprive a county of an additional burst in the tax base — making the possibility of additional relocations of such magnitude somewhat slim.

“What Nashville did 10 years ago for Dell probably will not be done again — it’s basically a long-term tax break on a public piece of property,” Carroll said. “If you’re talking about Nissan and you’re giving away property taxes, you’re giving away hundreds of millions of dollars. If we got another Nissan, somebody would probably put together a deal, but you get 1,300 jobs once every 10 years. [Williamson] probably doesn’t have the flexibility to do it now.”

The questions remain regarding how high Davidson County would be willing to jump should a company come calling on May Town’s door.

According to Paul Ney, the head of the Mayor’s Office of Economic and Community Development, the county would approach large-scale incentives cautiously. Davidson could do such packages, but must be “realistic” about their potential impact, he said.

“You have to strike a balance or try and identify at what point you have maxed out in the tax revenue you are willing to forgo.”

Ney added that although Davidson County considers itself competitive for new companies, Metro government is not of the mindset that it should recklessly hand out incentives in order to snag business. For example, he said the city would never abate taxes that would go toward schools.

“We know we are competing for potential relocations where both states and local governments are trying to sweeten the pot, some being much more desperate than others,” Ney said. “We don’t have a sense of desperation.”

That cautious philosophy has history in action. Davidson County heavily labored last year to attract a Bridgestone Firestone test lab, which would have brought 629 jobs to the area, but stopped short of trying to top the $68 million incentive package Ohio offered to keep the facility in Akron.

Should the May Town project be built, Davidson County would have an attractive location for corporate campuses within its boundaries. However, with the increase in companies calling, there could be an added stress on the county to provide the high-dollar packages that will close the deal.

 

2 Comments on this post:

By: Kosh III on 6/22/09 at 8:28

"economic incentives these high profile businesses are looking to score?"

Here's a thought: maybe these businesses should stick to making profits instead of trawling for huge welfare checks from the taxpayer.
So much for "free enterprise."

By: WrdBrn on 6/24/09 at 7:38

Stop the debate over the merits of May Town. The core question has been spun so many different ways that we are not even talking about the issue.

First you are dealing with an absentee landowner, a plight on Nashville in and themselves. Said landowner, The Mays, have asked a hired gun, Tony G. to get the zoning changed from one of the lowest density most ag. friendly all the way to Metro's very highest density industrial/commercial. Here is the catch: In the process they have put on hold or will effectively wipe out the planning and development process of voters, businesses, and elected officials for areas that reach from close to Love Circle to Nine Mile Hill all the way to the river and across to the county line. Gone are years of focused, purposeful decision making. Gone.

No one person with enough money to build the infrastructure of a city the sized of downtown should have that hold over any of us. Ever.