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Nationwide Study Finds TN Among Economic Development Subsidy Top-Spenders

Press release from Tennesseans for Fair Taxation; June 19, 2013:

Washington, DC, June 19, 2013 — In recent years, state and local governments have been awarding giant economic development subsidy packages to corporations more frequently than ever before. The packages frequently reach nine and even ten figures, and the cost per job averages $456,000 and often exceeds $1 million. Tennessee is tied for fifth-most megadeals—with 11—and ranks eighth in total megadeal spending at $2.5 billion.

These are the findings of Megadeals, a report released today by Good Jobs First, a non-profit resource center based in Washington, DC. The report can be found online at www.goodjobsfirst.org/megadeals.

“These subsidy awards are getting out of control,” said Philip Mattera, research director of Good Jobs First and principal author of the report. “Huge packages that used to be reserved for ‘trophy’ projects creating large numbers of jobs are now being given away more routinely.”

Naomi Goodin of Tennesseans for Fair Taxation (TFT) noted, “Tennessee is fifth in the number of megadeals, yet tied for last in measures of personal income growth. This sounds like a ‘reverse Robin Hood’ mentality. We already penalize our middle and lower-income citizens with proportionally higher taxes. Let’s at least make sure their tax dollars will benefit the people.”

“Further,” Goodin adds, “Recent media attention to the privatization of state government functions and preferential bias in the contracting process illustrates why transparency and accountability to taxpayers must be a mandate; not an option.”

In a painstaking review using hundreds of sources, Good Jobs First identifies 240 “megadeals,” or subsidy awards with a total state and local cost of $75 million or more each. The cumulative cost of these deals is more than $64 billion.

The number of such deals and their costs are rising: since 2008, the average frequency of megadeals per year has doubled (compared to the previous decade) and their aggregate annual cost has roughly doubled as well, averaging around $5 billion. For those deals where job projections were available, the average cost per job is $456,000.

Michigan has the most megadeals, with 29, followed by New York with 23; Ohio and Texas with a dozen each; Louisiana and Tennessee with 11 each; and Alabama, Kentucky and New Jersey with 10 each. Forty states plus the District of Columbia have done at least one megadeal.

In dollar terms, New York is spending the most, with megadeals totaling $11.4 billion. Next is Michigan with $7.1 billion, followed by five states in the $3 billion range: Oregon, New Mexico, Washington, Louisiana, and Texas.

“Despite their high costs, some of the deals involve little if any new-job creation,” said Good Jobs First executive director Greg LeRoy. “Some are instances of job blackmail, in which a company threatens to move and gets paid to stay put. Others involve interstate job piracy, in which a company gets subsidies to move existing jobs across a state border, sometimes within the same metropolitan area.”

Megadeals have been awarded to many of the largest and best known companies based in the United States as well as foreign ones doing business here, including: every large domestic automaker and all of the foreign auto producers with appreciable U.S. sales; oil giants such as Exxon Mobil and Royal Dutch Shell; aerospace leaders Boeing and Airbus; banks such as Citigroup and Goldman Sachs; media companies such as Walt Disney and its subsidiary ESPN; retailers such as Sears and Cabela’s; old-line industrials such as General Electric and Dow Chemical; and tech leaders such as Amazon.com, Apple, Intel and Samsung.

The most expensive single listing is a 30-year discounted-electricity deal worth an estimated $5.6 billion given to aluminum producer Alcoa by the New York Power Authority. Taking all of a company’s megadeals into account, Alcoa is at the top with its single $5.6 billion deal, followed by Boeing (four deals worth a total of $4.4 billion), Intel (six deals worth $3.6 billion), General Motors (11 deals worth $2.7 billion), Ford Motor (9 deals worth $2.1 billion), Nike (1 deal worth $2 billion) and Nissan (four deals worth $1.8 billion).

Fifty-six megadeals went to corporations with parents based outside the United States and seven more went to joint ventures of domestic and foreign companies.

The megadeals list is a new enhancement of Good Jobs First’s Subsidy Tracker database, the first online compilation of company-specific data on economic development deals from around the country.

Until now, the content of Subsidy Tracker has consisted exclusively of official disclosure data provided by state and local governments. However, many large deals pre-dated disclosure and many recent ones are missing from the official lists because of gaps in state and local transparency practices. To overcome those constraints, Good Jobs First went back and assembled information on large deals using a wider variety of sources. The resulting list of megadeals has been incorporated into Subsidy Tracker (www.subsidytracker.org).

In a policy sidebar, the study points out that the Governmental Accounting Standards Board (GASB) has been long-negligent in failing to promulgate regulations for how state and local governments should account for tax-based economic development expenditures. If GASB were to finally promulgate such regulations—covering both programs and deals—taxpayers would have standardized, comparable statistics about megadeals and could better weigh their costs and benefits.

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Business and Economy NewsTracker

Norris Tweets Dig at Dems on Solyndra Setback

Everything under the sun seems to be open to squabbles over jobs between Republicans and Democrats in the Tennessee Legislature. Now it’s solar panels.

Senate Majority Leader Mark Norris tweeted Tuesday night, “Solyndra’s shadow as Dems plan to tour Bredesen’s solar farm.” Norris linked to a recent Nashville Business Journal article noting that solar businesses either seem to be starting up or fading away.

Solyndra, based in Fremont, Calif., specializes in rooftop solar power systems. The company received a loan of $535 million in 2009 as part of the federal stimulus package and has been lauded by the Obama administration as an example of the nation’s energy future.

But the company has shut down, laid off hundreds of workers and filed for Chapter 11 bankruptcy protection. The company also faces a federal investigation. The House Energy and Commerce oversight committee is scheduled to begin hearings on Solyndra on Wednesday, but Solyndra executives have postponed their appearance, citing the bankruptcy proceedings. A column posted Tuesday night on Politico called the Solyndra venture “corporate favoritism” and “Chicago-style deal-making.”

Norris picked up on the Solyndra news as a further dig at Democrats, who plan to make the West Tennessee Solar Farm with Haywood County Mayor Franklin Smith part of their jobs tour Sept. 19-24.

The Solar Farm is on the first day of the Democrats’ tour, right after a tour of the vacant West Tennessee megasite. The solar farm, near Interstate 40, is part of the Volunteer State Solar Initiative of former Gov. Phil Bredesen.

Norris responded to the Democrats’ jobs tour announcement early this month by calling it the “Obama Apology Tour.”

But in February, Republican Gov. Bill Haslam expressed his pleasure that the U.S. Department of Energy had cleared the path for the solar farm, citing Tennessee’s commitment to a clean energy future.

“It’s a tangible demonstration that jobs and investment in this fast-growing sector of our economy are welcome in Tennessee,” Haslam said in a formal statement at the time.

In the same announcement, Economic and Community Development Commissioner Bill Hagerty said, “We’ve seen billions of dollars in capital investment in the solar industry alone in Tennessee. Coupled with the investments we’re seeing in energy efficiency, sustainable transportation and other forms of clean energy, the clean energy sector has the potential to truly become a bright spot for Tennessee in terms of job growth.”

Haslam and U.S. Sen. Lamar Alexander recently visited another Bredesen-linked project, the ethanol-from-switchgrass process in Vonore, Tenn., after which both the governor and the senator expressed support for the business but limited interest in subsidies for it.

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Press Releases

State Government Offering $2,500 Electric Vehicle-Purchase Subsidies

State of Tennessee Press Release, September 8, 2010:

NASHVILLE – Governor Phil Bredesen today announced the state of Tennessee, through its participation in the national Electric Vehicle (EV) Project, will offer a $2,500 rebate on the first 1,000 electric vehicles purchased in Tennessee. The state rebate will complement a federal tax credit of up to $7,500 for the purchase of electric vehicles.

“We’ve worked hard in Tennessee to become a leader in driving clean energy solutions and creating clean energy jobs,” Bredesen said. “We’re already seeing additional jobs being created as a result of those efforts, and our participation in the Electric Vehicle project is another indication that Tennessee is leading the way to the future of clean energy and alternative fuels.”

The Governor announced the rebate program today during a lunch time address in Nashville at the TVA Fuel Solutions Forum, which focused on using electricity as a transportation fuel.

Tennessee is one of six states and the District of Columbia selected to participate in the EV project, which is funded through a $100 million grant from the U.S. Department of Energy. The EV project is the largest deployment of electric vehicles and charging infrastructure in U.S. history.

The $2.5 million in state funding for the rebate program was approved in last year’s state budget and draws from the petroleum violation escrow (PVE) account, which are funds collected by the federal government from oil companies. PVE dollars can only be used for approved energy-related activities.

The rebate program will be administered by the Department of Revenue, which will offer the rebate to consumers through Nissan’s network of automotive dealerships in Tennessee. The rebate will be applied at the time the vehicle is purchased.

In May of this year, Bredesen joined Nissan officials in breaking ground for the 1.3 million square foot facility that will produce the lithium-ion batteries that will power the Nissan LEAF, an all-electric vehicle that produces no emissions. The battery facility is expected to create 1,300 additional jobs in Smyrna. The Nissan LEAF will also be manufactured in Smyrna and will begin rolling off the production lines in late 2012.

Consumers interested in purchasing the Nissan LEAF can learn more about the registration process by visiting www.nissanusa.com.

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Press Releases

TN Airports Landing $25.9 Million in Government Grants

Press Release from the State of Tennessee, Aug 12, 2010:

Grants Awarded Through TDOT’s Aeronautics Division

NASHVILLE — Governor Phil Bredesen announced $25.9 million in federal and state aeronautics grants today to fund improvements at 22 commercial and general aviation airports in Tennessee.

“From moving people to moving freight, the airports in Tennessee are vital pieces of the state’s overall economy and travel system,” said Bredesen. “Tennessee’s airports are often the front doors to our communities, welcoming visitors from across the globe, so it’s important to keep them up to date in order to stay competitive and efficient at meeting the needs of both businesses and travelers.”

[Go here to see a list of airports scheduled to receive the grants]

The grants are made available through the Tennessee Department of Transportation’s Aeronautics Division.

“This division administers federal and state funding to assist in the location, design, construction and maintenance of Tennessee’s diverse public aviation system,” reported TDOT Commissioner Gerald Nicely. “We are pleased to be able to provide millions of dollars each year for the betterment of our airports through these grant programs.”

Except for routine expenditures, grant applications are reviewed by the Tennessee Aeronautics Commission (TAC), which is a five member board charged with policy planning and with regulating changes in the state airport system plan.

TAC Chair Fred Culbreath explained, “As Tennessee’s communities continue to grow, the airports must keep pace. These grants are vital to many airports in Tennessee and our board examines the applications carefully to ensure the proper state and local matching funds are in place and that the grants will be put to good use.”

The TDOT Aeronautics Division has the responsibility of inspecting and licensing the state’s 126 heliports and 75 public/general aviation airports. The Division also provides aircraft and related services for state government and staffing for the Tennessee Aeronautics Commission.