As Dean points incentives toward small business, some say they should have more teeth

Monday, April 15, 2013 at 12:01am

As deal after deal offering tax breaks as incentives for corporations has breezed through the Metro Council in recent years, the opposition — such as it is — has generally raised two objections.

If Mayor Karl Dean is going to continue using such incentives as a primary tool for economic development in the city — and there has been no indication that he won’t — then, they’ve said, similar advantages should be made available to small businesses looking to grow and hire more workers. Furthermore, they say, multimillion-dollar deals between the city and corporations should include some measure of accountability.

Those sentiments have come perhaps most often from Councilman Josh Stites. A fiscal conservative, and one of the few voices on the council that is ever heard singing a different line than Dean, Stites has consistently voted against the tax breaks, which have become more common under this mayor’s administration than any before.

Since he took office, Dean, typically with near-unanimous support from the council, has entered into 15 economic incentives deals with companies. In some cases, the deals have been aimed at keeping a company, its jobs and its offices, in Davidson County rather than seeing it move down the road to Williamson County. The deals have typically included breaks on property taxes in exchange for a company’s plans to hire more workers or expand existing headquarters.

Many times the administration has orchestrated relatively smaller deals, like one in 2010 that included a $3.7 million property tax abatement with HealthSpring, or more recently, one that granted $2.3 million in tax breaks to surgery center operator AmSurg, and one worth $700,000 in breaks to Oberto Sausage Co.

After the council approved one of the largest incentives packages in the city’s history in December, a 20-year deal with Nashville-based hospital operator HCA estimated to total $66 million, Stites railed against the one-sided nature of the city’s approach. Instead of granting tax breaks only to well-connected corporations, he said, some sort of incentives should be available to small businesses as well. At-Large Councilman Charlie Tygard did not join Stites in opposing the deal — actually, Stites was the only “No” vote — but he did share Stites’ sentiment about leveling the playing field, as it were. The two said at the time that they were mulling legislation to that effect.

Four months later, the Dean administration is pushing legislation, crafted with and sponsored by Tygard and At-Large Councilman Jerry Maynard, that would create an incentives program for small businesses. Under the program, businesses with no more than 100 employees who hire 20 or more full-time employees in one year would be eligible for one-time cash grants. As long as the new jobs pay at least $41,000 per year — the average salary for workers in the Nashville Metropolitan Statistical Area — businesses could receive $500 for each new employee, and $750 for each military veteran hired.

The program would also offer “blighted property reinvestment grants” to businesses located within certain districts, with property valued at less than $1 million. In exchange for an investment of more than $100,000 in “construction or rehabilitation,” businesses will be eligible for a one-time grant equal to 10 percent of the costs of exterior improvement.

In each case, grants would be awarded on a “first come, first served” basis, with a maximum of $50,000 for any individual business. The $1 million in funding for the entire program — $500,000 for each portion — will come from Metro’s general fund, and be included in the mayor’s forthcoming budget, according to his office.

“This new set of tools expands the way the city can help small businesses thrive and grow. Small businesses are the bedrock of our economy and employ the vast majority of Nashvillians,” Dean said in a prepared statement. “Our city has a well-earned reputation as being a great place for entrepreneurs and small businesses. Just this week, Governing.com ranked Nashville as the sixth-friendliest metro area to small businesses. This initiative will help us further support this important segment of our economy.”

Stites welcomed the news, but with the usual caveat.

“I support it,” he said. “I maintain that our best economic development tool is a low tax rate for everybody. They obviously don’t agree. They want to play in the realm of economic development tax incentives. So if we want to do that, and if we’re going to go that direction, I think it’s fair to at least allow small businesses to have a chance at some of those.”

But the conversation quickly turned to accountability. The small-business program is good, Stites said, but noted that it “has more restrictions on small businesses than what we put on big businesses when we give them their tax benefits.”

“There’s very little accountability for the big guys,” he said.

The matter of accountability for companies who receive millions in tax breaks in exchange for the promise of jobs was raised last week, even without the consideration of a new incentive deal from the Mayor’s Office.

After receiving $2.4 million in incentives to remain in Davidson County two years ago, mobile phone insurer Asurion confirmed earlier this month that it was cutting 32 positions from its IT department. The headline immediately stirred up the debate over incentives, but officials with the company have said the cuts shouldn’t keep them from meeting their commitment to create 500 new jobs in the five years after receiving the money from Metro.

Metro’s economic incentive deals do not always include such provisions. Just before third and final votes on the arrangements with AmSurg and Oberto earlier this year, Stites offered amendments that would have required the companies to reach job-creation benchmarks in order to receive the full tax break. His amendments failed, but received some support from council members who said they agreed with the idea in general, but wouldn’t vote to change a deal at the last minute. Stites, along with Councilmen Jason Holleman and Phil Claiborne, said at the time that they’d like to see the Dean administration consider such provisions in the future.

Matt Wiltshire, director of the mayor’s Office of Economic and Community Development, told The City Paper that “every deal is different,” making broader discussions of “accountability” in hypothetical future deals difficult. But he noted that the city’s deal with HCA did include job benchmarks that the company must meet to receive the full tax abatement. With regards to the small business incentive program, he said, there will be provisions requiring that an employee be hired for 90 days before receiving any grant money.

“In general, we try, as much as possible, to balance out all the competing interests of getting them here, winning the deal, encouraging the provisions, but not creating a byzantine level of complex legislation that really defeats the purpose of it in the first place,” he said of the process of crafting the deals on a case-by-case basis.

Stites said he, and others who agree with him, have considered the idea of legislation requiring that every deal include some sort of accountability provision, but it’s a non-starter.

“It is something we’ve talked to the administration about, and it is something that they are not in favor of and they will oppose,” he said. “And so the political climate will have to be right in order for anything like that to be brought forward and be successful.”

1 Comment on this post:

By: Ask01 on 4/15/13 at 4:48

I can't help but think this is a smokescreen or a scam.

There has to be an ulterior motive underlying any seeming benevolence toward small businesses.

Beware of small time mayors offering anything.