Business and Economy News

Southerland Holding Out Hope for NE TN Megasite

State Sen. Steve Southerland sounds enthusiastic about the possibility of Upper East Tennessee landing a TVA megasite like the ones taxpayers provided for Volkswagen and Hemlock Semiconductor.

But the Morristown Republican’s enthusiasm may be more a matter of a legislator cheerleading than an indication of any substantive action. Other officials, including some community leaders in the region itself, say they see no hint of a megasite headed to the area, for a variety of reasons.

State Economic and Community Development Commissioner Bill Hagerty said recently he had heard the subject come up in regard to Upper East Tennessee, but he downplayed the potential.

“In terms of a new large-scale megasite like West Tennessee, I think there is a lot of optimism we might be able to do that in other parts of the state, but there is nothing along that magnitude on the drawing board right now,” Hagerty said.

Alan Palmieri, mayor of Jefferson County, said he has heard the subject raised for his region — but only “for years and years and years.” Mayor Bill Brittain of Hamblen County, which includes Morristown, said this week he has not heard the matter come up.

But in talking to a reporter at a recent event in Morristown, Southerland made it sound like efforts are underway for landing a megasite.

“We’ve got sites in the area that could be a megasite,” Southerland said. “It has a good possibility, because our counties are working together. We know it has to be a joint, regional project.

“We approved three megasites. We’ve got one in West Tennessee, Middle Tennessee and then one in Chattanooga. But we have not received one for Upper East Tennessee. It’s our turn. We spent the money down there. If the people are willing to work together up here and we have somebody wanting to come this way we’re going to go for it.”

Megasites have been noteworthy for several reasons recently. Tennesseans have begun to see the fruits of preparing large tracts of land and infrastructure, with Volkswagen opening its manufacturing plant in Chattanooga and Hemlock making an impact in Montgomery County, including ties with Austin Peay State University.

A third megasite, in Haywood County in West Tennessee, has begun to get more attention from government officials, but it remains vacant.

Gov. Bill Haslam has taken some of the glimmer off the headline-grabbing practice of attracting large businesses to the state, pointing out that most of the job growth comes from existing businesses, not high-profile relocations.

Nevertheless, Haslam has repeatedly said that doesn’t mean the state has abandoned the big relocation approach. At an economic development meeting in Morristown, Haslam said the administration is still ready “to move heaven and earth” to get such investments.

Southerland picked up on that line.

“Just like he said, we’d move heaven and earth to get another Volkswagen here,” Southerland said. “When you look at Hamblen County, we’re like a hub for other counties bringing in automotive jobs.”

Taxpayer bill can reach hundreds of millions of dollars

State and local taxpayers typically can end up contributing hundreds of millions of dollars to the development of a megasite.

In the case of the Enterprise South industrial site that attracted Volkswagen to Hamilton County, the government’s bill, including tax breaks, was estimated in one report at $500 million. Volkswagen made an investment of $1 billion, roughly the amount Hemlock put into the megasite in Montgomery County.

Arrangements for the sites can involve help from federal, state and local governments. After that, the value of the investment is widely open to debate. Economic development officials routinely have said the kinds of businesses attracted by the megasites are giant winners for the locations. But increasingly, questions exist as to the return on the investment in attracting jobs, as states have become highly competitive.

Haslam has expressed surprise at what some companies want in return for creating jobs in Tennessee, although he has said his administration remains interested in attracting the types of investments made by Volkswagen and Hemlock.

“In this state, the funding for the megasites has been a combination of local government money and state government money, with some participation from TVA funding the certification process,” said Clint Brewer, spokesman for the Department of Economic and Community Development.

In Montgomery and Hamilton counties local governments handled the purchase of the land. For the Haywood County megasite, where local governments lack such resources, the state has purchased most of the land. Theoretically, private entities could have to assemble the property at a megasite.

“The local communities pay for the site’s due diligence and improvement, such as environmental reviews, infrastructure improvements, etc.,” said Mike Bradley, of the TVA news bureau in Knoxville, by e-mail Thursday. “This sometimes is done even after the site has been certified as a megasite. The effort is usually championed by a local economic developer.”

The Tennessee General Assembly this year passed legislation (SB1239) to allow the East Tennessee Regional Agribusiness Marketing Authority, or ETRAMA, to issue bonds.

The idea of economic development in the region is to enhance development along the I-81 corridor.

Two issues face the region on infrastructure for business development: hooking up a sewer system to accommodate large capacity and getting connectors in place for major rail lines in the region. Plans for the sewer line would involve trunk lines that would feed wastewater into a plant in Lowland, which is in Hamblen County.

The vacant megasite in Haywood County has 1,720 acres. Another vacant TVA megasite in Hopkinsville, Ky., has 2,100 acres. Those kinds of numbers may work against mountainous Upper East Tennessee.

“I was told years ago because of our geography it’s hard to collect 500 flat acres,” said Rep. Tony Shipley, R-Kingsport. “Maybe we don’t get a megasite. Maybe we get a mega-area.

“The same amount of money is being spent in Chattanooga, West Tennessee and the Nashville basin area. Maybe that same amount of money could come here, because we are distinctly different.”

Palmieri, the Jefferson County mayor, makes a similar observation.

“You look at the land, and you say, ‘Where are you going to locate this?’ Terrain would be part of the process because whatever you do, you’ve got to make it economically feasible. If you’re going to have to go in and take down mountains and blast and everything else, it’s going to add to the cost, which everybody wants to avoid.”

In another way, however, geography is a plus for the region. State and local government officials point to the fact the region is within driving distance of a large portion of the nation’s population.

Like Disney World theme park, talk of megasite ‘just conversation’

Palmieri has heard talk of a megasite but sees little in the way of real progress.

“I know various mayors have talked about it for many years. Various chambers (of commerce) have talked about it. Nothing has really developed outside the fact it’s just conversation,” he said.

“Where would you go? Who’s going to bring in something that massive today? It’s probably been put on the back burner, but it’s been going on for I guess probably the last 10-12 years.”

Southerland sees other factors.

“We know with the earthquake in Japan and the value of the U.S. dollar that Japan will be looking more at investing in the United States in automotive plants. And we’re hoping to get one of whatever comes this way,” Southerland said. “You’ve got to be prepared because when they come they’re going to be looking for somebody that’s already ready to go.”

Palmieri said that for years there was talk that the people from Disney World were going to put a theme park in Cocke County.

“I heard that for 20 years,” he said. “That was a hot one there for awhile. It was going to be just a regular theme park, like a Disneyland or Dollywood. That was before Dolly owned Dollywood.”

But if the region were to get a large plant, Palmieri says the automotive or airline industries would make good sense. He said the area’s workforce, which has experience in production lines, would be good for a manufacturing base.

When asked why the airline industry would be a good fit, Palmieri said, “Everything they have is predominantly in a high-tax area. What they’re having to pay the workforce there is probably three or four times what they could have to pay a workforce here in Jefferson County or East Tennessee.

“Transportation-wise, with the Interstate and everything else, easy access in and out, I can see where they could save a lot of money, and it’d be much more profitable for their company.”

Aircraft maker Boeing has recently been involved in a dispute with the National Labor Relations Board over a plant it plans to build in South Carolina. Palmieri said Tennessee should get a look.

“If Boeing ever took a serious look, they could come in, acquire property and build buildings and have a workforce ready to go, and they would save money almost right off the bat,” he said. “South Carolina is more expensive. They have payroll taxes and everything else. I don’t understand that.

“I have family there. It’s a beautiful state. I can’t stand Steve Spurrier (the South Carolina football coach). But why would you go to South Carolina when Interstate access, transportation needs, centralization, taxes, everything is so much better right here in East Tennessee? I don’t understand that.”

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Ramsey Seeks Details Of Taxpayer-Funded Economic Incentives

Officials in the administration of Gov. Bill Haslam have tried not to point fingers or publicly second-guess actions by former Gov. Phil Bredesen’s team involving major business relocations.

But Lt. Gov. Ron Ramsey appears willing to ask tough questions about the deals sealed by Bredesen’s job recruitment officials, saying lawmakers have been left clueless about details on state deals that came late in Bredesen’s time in office.

Ramsey is wondering not only what is in those deals but asking exactly who made them and suggesting that more people — like himself — need to be part of the approval process since the Legislature has to OK the state money involved.

Ramsey has seized upon statistics provided by the current Department of Economic and Community Development that show only a small fraction of new jobs in the state in recent years has come through relocations.

Such relocation deals were hallmarks of Bredesen’s administration, where high-profile agreements like the arrivals of Volkswagen, Hemlock Semiconductor and Wacker Chemie were hailed with headlines that Tennessee was the place to be for major businesses looking for new homes.

But Ramsey is raising questions about deals that came later, involving Electrolux in Memphis and in Hamilton and Bradley counties.

Haslam has said the state is still pursuing relocations by big companies but that the focus is shifting to expanding businesses already here because that’s where real job growth is.

But if Haslam is reluctant to publicly question the deals made by his predecessor, Ramsey appears to be a willing volunteer. Ramsey, R-Blountville, has said he is “elated” that the Haslam administration is taking a different course on job growth.

Ramsey contacted Matt Kisber, Bredesen’s commissioner of Economic and Community Development, and scheduled a meeting to discuss deals involving the kitchen appliance maker Electrolux and distribution centers by Internet sales giant Amazon.

Kisber canceled, and Ramsey speculated that Kisber shied away from potentially becoming part of a “media event,” since Ramsey had told reporters about the scheduled meeting. Ramsey still held hope this week that he and Kisber could talk.

The issue raises matters of transparency in government. Business relocation negotiations notoriously involve tight lips. The issue has even crept into the local level. One bill considered by the Legislature this year would give a local government authority to designate negotiations as proprietary information.

When the Haslam administration presented its jobs plan last week, the presentation included two pie charts, taken from statistics in the last three quarters of 2009 and the first quarter of 2010, showing that the vast majority of new jobs in Tennessee were created by existing businesses, not relocations.

One chart, accounting for all jobs in the state — those achieved with or without state help — shows only 1.2 percent came from relocations to Tennessee. Another chart showed jobs announced by ECD — jobs where the state had a hand in creating them — and 27 percent of those came through re-locations.

The Department of Economic and Community Development said 85.6 percent of all jobs in the state came from expansion of existing businesses, 13.2 percent from newly created businesses, leaving only the 1.2 percent in re-locations.

Haslam said his interest is in results.

“You look and see: Where are the new jobs coming from? And 98 percent are coming from existing businesses in Tennessee,” Haslam said last week.

“We’re not going to quit recruiting outside our borders, but we are going to make certain we put the right focus on energy and dollars where the results are. So it’s not a question of saying we’re going to quit welcoming people in. Just the opposite. But we are going to focus on where the results are.”

Ramsey climbed aboard his war horse last week, telling reporters, “I think we’re going to look very closely at things that happened in the last month of the Bredesen administration, as they handed out $92 million, more like $100 million, to Electrolux. Apparently that’s in writing. We’ll have to honor it. But that’s pretty easy for a governor who knows he is leaving office in a month to do.

“The whole Amazon tax issue, that they’re not paying sales tax, I just don’t think that’s something that should ever have been agreed to. Apparently, it’s agreed to. We’ll honor it. I think all those types of programs in the future are going to be looked at very closely before we do it again.”

Ramsey said he wanted to make sure businesses are held accountable for their side of the deals.

“I am absolutely elated that our Department of Economic and Community Development now will be concentrating on trying to help existing employers here in the state of Tennessee, most of them homegrown businesses,” Ramsey said.

“They grow businesses at three, five, 10 employees at a time. That is where you grow jobs. They’re going to be concentrating on that. I’m excited about that.”

Haslam has been relatively quiet on the Electrolux and Amazon deals. The governor has said the state should honor a previous commitment to Electrolux, and he has said on Amazon, where the issue has been that Amazon is not collecting sales taxes, that the matter needs to be resolved nationally and can’t be handled by only one state.

But Ramsey has expressed concern that the Electrolux and Amazon agreements appear to be “cloaked in secrecy.”

“I just want to try to figure out exactly what we have promised some of these companies because, keep in mind, the Legislature is the ones that have to vote on these appropriations,” Ramsey said.

“I think it is legitimate for us to find out what was promised, and when, and we’re still having a very, very, very tough time getting to the bottom of this.”

The House on Monday approved $106 million in bonds on a 91-2 vote, with most of the financing devoted to Electrolux.

Ramsey said Sen. Randy McNally, chairman of the Senate Finance Ways and Means Committee, and members of the House have also been asking questions about the Electrolux and Amazon agreements. Ramsey said he did not know which state officials approved the deals.

“Not me. That’s all I know,” he said.

Efforts this week by TNReport to reach Kisber were unsuccessful.

“I do think there needs to be a larger group of people that agree to this type of policy,” Ramsey said. “It needs to be a combination of the executive branch and the legislative branch.”

Ramsey said he didn’t remember that anything was kept secret about the Volkswagen deal, where the car maker made a $1 billion investment in a plant in Hamilton County, or the Hemlock Semiconductor deal, which involved a $1 billion investment in Montgomery County, or the Wacker Chemie deal in Bradley County, which also carried a $1 billion investment.

“Yet it seems to be that the deals that were made in the waning moments of the last administration are cloaked in secrecy,” Ramsey said.

He hasn’t even learned much from the Haslam team. Ramsey said he asked Haslam and new ECD Commissioner Bill Hagerty if they had actually talked to the Bredesen people about the matter.

“The answer is no, apparently,” Ramsey said.

Kisber and former Department of Revenue commissioner Reagan Farr together launched Silicon Ranch Corp., a green energy company, when they left state government. Bredesen is listed as chairman of Silicon Ranch and is featured atop Kisber and Farr on the leadership page of the business’s Web site.

Ramsey said there should at least be agreements in writing on Electrolux and Amazon.

“I have not seen anything in writing on either one of those deals,” Ramsey said. “That’s all I’m asking for, some kind of full disclosure, and if it’s something that needs to be kept confidential for business recruitment reasons then I’m more than happy to keep it confidential. Yet at the same time I want to make sure we as a Legislature — at least some members of the Legislature — know the details of some of these meetings.

“The one thing that I’d have to say is it makes you wonder if anything was in writing, if nothing has been presented in writing.”

Legislation sponsored by Memphis lawmakers and considered this week would authorize a local government, with the agreement of the local government’s attorney, to designate records as proprietary information, further preventing details of deals from becoming public.

The legislation, HB1774, would allow a local legislative body to determine that information should not be released because of its “sensitive nature” and that it should be considered confidential for five years. Only after that period would it become public record and open for inspection.

The City of Memphis has posted on its website the Electrolux deal, including a section on confidentiality. That agreement, in Section 12.5, which appears on Page 25 of the document, says:

“Each Public Authority understands the importance to itself and the Company of keeping details concerning the transactions contemplated hereby strictly confidential.

“Accordingly, each Public Authority acknowledges that, subject to all applicable laws which require disclosure of public records, all confidential, proprietary and trade secret information of the Company which has been delivered or otherwise made available to the Public Authorities, including the terms of this Agreement, is subject to the Confidentiality Agreements and may not othewise be disclosed to any third-party except in accordance with such respective agreement or as mandated by applicable law.

“Subject to applicable law, each Public Authority hereby agrees to redact any information in this Agreement which the Company deems, in its sole and absolute discretion, proprietary. The State hereby agrees that it will not publish any of the Letter Rulings issued in connection with this Agreement.”

The document further says that no press releases or other public disclosure about the transaction can be issued by any public authority without approval of the company.