Business and Economy NewsTracker

TN Will Likely Keep Pledge to Grant VW $300M Incentives Package

Despite some Tennessee lawmakers displeasure with the growing influence of the United Auto Worker’s union at the Volkswagen plant in Chattanooga, the Legislature appears likely to approve a $300 million incentives package for the automaker.

A few members of the General Assembly’s Hamilton County legislative delegation grumbled to the Chattanooga Times Free Press editorial board last week that VW’s continued acceptance of the labor union was causing them some consternation about whether or not to approve the proposed incentives in this year’s legislative session.

Sen. Todd Gardenhire, a Chattanooga Republican, told TNReport Wednesday he was upset with the automaker and labor union for “not honoring” the outcome of the unionization vote last year. “They voted in a fair election not to be represented by UAW, and then they turn around and ignore that,” he said. But Gardenhire added that if a promise was made by the state’s governors, the Legislature would “honor that” because they didn’t want to “embarrass the state.”

Likewise, Senate Speaker Pro Tem Bo Watson said while the incentives could probably come up  during the greater budget discussion, the Volunteer State has “a long history of honoring its commitments, and none of us collectively are going to allow that not to happen.”

Additionally, House Majority Leader Gerald McCormick, R-Chattanooga, told reporters Wednesday that while he didn’t want the UAW to “slip in the back door because of a secret deal with Volkswagen,” he expected the Legislature to approve the incentives because “Tennessee will keep its promises.”

And despite the skepticism of Hamilton County legislators, the head of Volkswagen Group for the Americas said he is “very confident” the incentive package will be approved.

Gov. Bill Haslam said last week he understood the lawmakers unease, and he had “expressed” similar concerns as well, but he hoped the local lawmakers would support the incentives package because their votes — as the hometown gang — would be “very important” to its passage. The package was offered to the German company last summer to encourage expanded production at the Southeast Tennessee location. The automaker announced in July Chattanooga would be home to production lines for the new CrossBlue and Cross Coupe GTE.

“We’ll have those discussions about where we think Volkswagen is and why we think this is the right proposal for the state,” Haslam said.

Haslam added future efforts by Tennessee to recruit businesses could be harmed if the legislation fails. “We always put that as a caveat to the deal, that the Legislature has to approve, but historically, that has always happened in Tennessee,” he said.

Last February, the UAW failed an attempt to unionize the plant — 712 to 626 — leading them to file a complaint against several Tennessee politicians who suggested the unionization could interfere with the incentives. The UAW later dropped the case, citing the time it would have taken to settle.

Haslam said this Spring he hadn’t intended withholding incentives from the company as a threat — he was just making “a statement of reality.”

The UAW has since established a chapter at the plant, and currently claims to represent about 45 percent of VW employees, giving the labor group the right to meet with top managers every two weeks, as well as regular plant access. Because of the closeness of the labor vote Volkswagen adopted a new policy to allow multiple unions to represent workers, with representation rights depending on the number of employees the union speaks for.

A rival labor group — the American Council of Employees — has complained that VW is showing favor to the UAW. ACE has also been working to sign up members in what they call an effort to offer the plant’s employees a choice in representation.

The UAW announced in December that Chattanooga’s Local 42 had been invited to participate in an executive committee meeting of the Volkswagen Group Global Works Council in Germany this month. The ACE interim president has disputed the UAW’s numbers, and said a number of the signatures the autoworkers union claims are invalid.

The free-market Nashville-based Beacon Center of Tennessee awarded its 2014 Yuletide season “Lump of Coal” jointly to UAW and VW. The Beacon Center bestowed the “dubious distinction” on UAW and VW for having “seemingly worked together to bilk the taxpayers of the state out of hundreds of millions of dollars,” a Beacon Center blog post declared. The center also alleged that despite being “firmly rejected” by employees at the plant, “UAW has continued trying to bully its way into the plant, and VW has seemingly been more than happy to comply.”

Business and Economy NewsTracker

TN Economy Said to Be Improving Despite Stagnant Jobs Climate

Although Tennessee’s unemployment rate has remained unchanged for the past three months, the state’s economic outlook is nevertheless improving, driven by growth in the Middle Tennessee region.

That was the take-home message from Dr. David Penn, director of the Middle Tennessee State University Business and Economic Research Center, who delivered remarks at MTSU’s Economic Outlook Conference on Sept. 27.

“Employment is still growing by one-point-seven percent every year. Depending on what happens with government employment, it’s conceivable Tennessee could reach recovery to pre-recession levels within about 12 to 18 months, at [the current] rate of growth,” said Penn.

The Tennessee heartland continues to show economic improvement, but growth has slowed across other parts of the state, Penn said, adding that statewide sales tax collections appear to be braking. The recovery’s sluggishness is actually due in no small part to the economic woes of Tennessee’s overseas trading partners, such as Japan, China and the European Union — and in general the state’s reliance on exports, he said.

Although the number of new unemployment claims is at its lowest level since 2007, and is continuing to slowly fall, the state’s unemployment rate has in fact slowly increased over the year, holding steady at eight-and-a-half percent for the past few months, despite a decline in the number of layoffs, Penn said.

Tennessee is still among the top 10 states for high unemployment rates, he added.

But the unemployment rate will be the last number to change as a result of former workers rejoining the labor force at a faster rate than jobs are created, and should not be considered an indicator of improvement, or the lack of it, in the economy, Penn said.

“[The] labor force [number] has hardly changed over the year,” Penn said. “What’s happening here is that folks are jumping back into the labor force after jumping out in 2010, when the participation rates dropped fairly significantly. They’re jumping back in, [and] the number of jobs is just barely growing enough to absorb them, keeping the unemployment rate almost unchanged over the year.”

Additionally, the rate of growth in real earned income has been “accelerating generally” since early 2012, and has been increasing at about the same pace as the national growth rate, Penn said.

Counties with the lowest unemployment rates are for the most part located in the Middle Tennessee. Several of them are about two percentage points below the state average.

Rutherford and Williamson Counties both place high on the Bureau of Labor Statistics list comparing job and wage growth in the 334 largest counties nationwide, with Rutherford ranking sixth and Williamson coming in at 15 in job growth.

However, when it comes to wage growth, Williamson far outpaces Rutherford, coming in at eighth while Rutherford lags behind at 249.

Davidson comes in at No. 86 nationally for job growth and No. 254 for wages. Knox, Hamilton and Shelby are also included on the list, coming in ranked at Nos. 260, 193 and 186, respectively, in employment, and 12, 290 and 216 for wages.

The Metro Nashville region, which includes Murfreesboro and Franklin, ranks No. 1 in private sector job growth among the largest metropolitan areas in the United States with a growth rate of four-and-a-half percent, according to BLS statistics. Private sector job growth rates for most of the counties in the Nashville area are much higher than the Tennessee state average of about two percent, with Rutherford County’s growth rate at almost eight percent, while Williamson County’s is about five percent and Davidson is at three-and-a-half percent.

“Job creation is booming for the Nashville Metro [area],” Penn said.

Business and Economy Liberty and Justice Tax and Budget Transparency and Elections

Watson Working for Tax-Ruling Transparency

Hixson Republican Bo Watson backed off state legislation this year that would bring transparency to so-called “private letter rulings” — written statements issued to taxpayers from tax-collection agencies — because he was satisfied with efforts by the Tennessee Department of Revenue commissioner to do it on his own.

But even Sen. Watson remains uncertain if the effort for more openness is workable, because of privacy issues related to the rulings.

Private letter rulings have become a point of attention in the state this year because of the ongoing controversy over and its exemption from collecting sales taxes. Speculation has risen that Amazon may be benefiting from a letter ruling from the state, but such information has never been made public.

In fact, Watson said his dealings with Commissioner of Revenue Richard Roberts on making letter rulings more public have had “zero” to do with Amazon in particular. He — and apparently Roberts — just want more openness on the letter rulings issued by the department. An effort to reach Roberts on Wednesday was unsuccessful.

The Knoxville News-Sentinel reported Wednesday night that the Department of Revenue has initiated a shift in policy from the previous administration. The report said the department has issued 40 letter rulings this year and that 17 redacted versions will be made public, with another 15 still under review and eight kept secret.

Watson, the new speaker pro tem of the Senate, this week described some of the difficult issues surrounding letter rulings apart from the Amazon controversy. But he also spoke about his thoughts on the Amazon issue. The company is establishing two distribution centers in the Chattanooga area, one in Hamilton County and one in Bradley County. Watson’s district is part of Hamilton County. A third Amazon center is planned for Lebanon.

Watson said conversations have gone well with Roberts in trying to open up the letter rulings.

“Revenue has been working with me very cooperatively in trying to figure out a methodology that we might be able to do that,” Watson said. “The challenge is the privacy issue.”

There are two types of private letter rulings. One addresses a specific tax question as it relates to a specific business. Then there are letter rulings where a specific company asks a question but the answer has general application.

“So you want the public to be advised of those letter rulings that have general application,” Watson said. “How do you achieve that without revealing the source of the letter ruling?”

Watson’s SB0902 would require that a copy of any revenue ruling or letter ruling issued on or after Jan. 1, 2008 be made available for public inspection in accordance with current public records law. It calls for posting the ruling on the department Web site within 15 days of the date of the ruling, and it calls for the commissioner to redact from the ruling anything, like a name or address, that may identify the taxpayer who requested the ruling.

Watson said he introduced the bill because businesses had had frustrations with the administration of Gov. Phil Bredesen, whose term ended this January.

“They would go in with a tax situation and find out that there had been a letter ruling about it, but they didn’t know anything about the letter ruling. So it frustrated their business process,” Watson said. “So anyway, I introduced a bill to make private letter rulings more public.

“The challenge is that much of the information has to be redacted because obviously a business’s tax information is their private proprietary information if they ask a specific tax question. If the tax question has general applicability, how do you get that answer out to the public without revealing the source of the question?”

Simple deduction comes into play, he said.

“If a large company asks a question and you describe them as a large company with X number of employees, people will figure out who asked the question,” Watson said. “The commissioner, in our conversation, said, ‘Look, we’re going to be much better about issuing the response to these letter rulings than perhaps in the past.'”

Watson said Roberts believes the department can make changes without necessarily having a law to do it. Watson is going to sit back and see how it goes. If the department is unable to achieve the goal, then Watson said he would at least pursue debate on the issue.

Sen. Randy McNally, R-Oak Ridge, chairman of the Senate Finance Ways and Means Committee, this week said he appreciates efforts in the administration of Gov. Bill Haslam to address transparency on letter rulings. McNally has been an active player in the attempt to get Amazon to collect the sales tax.

But the issue of letter rulings is just one facet of the broad tax-collection ramifications surrounding Amazon and other online retailers. Haslam recently said he wants Amazon to collect sales taxes in a way that satisfies Amazon and the state. Haslam has also said he wants the state to honor its original commitment to Amazon, which was made by the Bredesen team.

Watson said he was not surprised by Haslam’s remarks and that that’s what he thought would happen all along. He said he got the impression there would be more discussions from what he heard in legislative hearings on Amazon this year.

When Haslam first made public remarks this month about wanting Amazon to collect the taxes, Watson said he was in San Antonio for the legislative summit of the National Conference of State Legislatures and got a heads-up phone call from Warren Wells of the governor’s staff to let him know about Haslam’s comments.

Lt. Gov. Ron Ramsey, who was at the San Antonio conference, did not get a similar phone call.

“He did not get a call from the governor last week, but they have had ongoing discussions about this issue,” said Adam Kleinheider, a spokesman for Ramsey. “So his comments did not surprise him in any way, and he is 100 percent on board with the governor.”

The NCSL summit included a discussion of e-commerce issues. A similar session was held at the Southern Legislative Conference last month in Memphis.

“As Internet commerce continues to grow, we’re all going to have to recognize that this is a new business model, and states, along with the federal government, are going to have to figure out a way to create tax equity among all the various means of commerce,” Watson said. “I don’t think it’s reached the tipping point where Congress is going to be motivated to act.

“If you’re Amazon, you want tax equity with all the other Internet retailers that may be working under the same model you’re working under — just as the bricks-and-mortar folks want tax equity with the Internet folks.”

Watson said he hasn’t had much contact with retailers since the Legislature adjourned this year, but he has heard from constituents who say a deal is a deal and that original agreements with Amazon should be honored. He said the only contact he has had with Amazon other than the hearings was a five-minute meeting in his office prior to the committee meeting.

Watson said people need to remember that the sales tax still applies to the transaction and the question boils down to who collects the tax, not whether it is owed.

“The state doesn’t aggressively pursue that, and I don’t think we’re going to encourage them on small-ticket items to aggressively pursue that,” Watson said.

Haslam has said Congress needs to settle the issue for the states.

“All states are trying to figure out how to deal with this new marketplace,” Watson said. “The challenge is how do we modernize the law to marry up to the new Internet commercial market that in the last five years has grown exponentially?” is an independent, not-for-profit news organization supported by donors like you!


Haslam Releases Storm Journal Video

Days before the Mississippi River is expected to crest in Memphis, Gov. Bill Haslam’s office is releasing a “video journal” of him on the ground tromping through the rubble left from last week’s storms.

“This is flooding of historic proportions. Everyone keeps talking about the flood of 1937 and being back to that level,” Haslam said during a stop in Dyersburg May 3. “We are prepared to respond as quickly as possible both in response and in relief after the flood waters recede.”

The YouTube video featured Haslam looking over destruction in Bradley, Hamilton, Greene counties with stops in Memphis and Dyersburg.

The five-minute production included highlights of remarks from federal lawmakers and officials including Sen. Bob Corker, Congressmen Scott DesJarlais and Phil Roe and FEMA Administrator Craig Fugate.

Local area lawmakers also offered remarks, including Bradley County Mayor Gary Davis, Cleveland Mayor Tom Rowland, Hamilton County Mayor Jim Coppinger and Chattanooga Mayor Ron Littlefield.

Press Releases

Hamilton County Mayor Named Haslam’s Top Administration Officer

Press Release from Gov.-elect Bill Haslam, December 3, 2010:

Ramsey Record of Success Indicative of Personnel Haslam Targeting

CHATTANOOGA – Tennessee Governor-elect Bill Haslam today announced Hamilton County Mayor Claude Ramsey as his Deputy to the Governor and Chief of Staff.

A former state representative, Ramsey is in his fifth term as Hamilton County Mayor and played a key role in recent educational and economic successes in Southeast Tennessee. His experiences at the state and local level as well as his commitment to job creation and education improvement are indicative of the personnel Haslam is targeting for his administration.

“Claude Ramsey is exactly the type of person I’m looking for as we build our team,” said Gov.-elect Haslam. “I discussed throughout the campaign the idea of leveraging regional assets for job creation, and Claude brings a unique set of experiences and understanding to job creation in Tennessee.

“He understands how government works; he understands how businesses work; and he understands how to get things done,” Haslam added.

“Claude brings communities together to benefit the region, and he knows the incredible importance of providing a quality workforce, which means offering Tennesseans a great education,” Haslam said. “He’ll serve Tennessee well, and I’m proud to have him on board.”

During his time as County Mayor, Ramsey rallied the community around public schools, attracting more than 9,000 people to participate and build consensus on recommendations and goals. The area’s recent economic successes have made headlines across the state, and during his term, Hamilton County has achieved a Triple A bond rating.

“I’m humbled to have the opportunity to work for my state and with a public servant such as Bill Haslam,” Ramsey said. “We as a state have many opportunities, and with Bill Haslam at the helm, we’ll focus on maximizing our potential in job growth, education reform and conservative budget management.”

Before becoming County Mayor, he served as the Assessor of Property from 1980-1994 and served as a County Commissioner for two years. He was elected to the State Legislature in 1972 and served four years. Ramsey, 67, is married to Jan Fizer Ramsey. Claude and Jan have a son, Rich Balthrop, a daughter, Stacy Schorr, and five grandchildren.