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« What is An Entrepreneur? | Main | Another Secret Deal » December 9, 2005Defending the Giveaway of Tax Dollars to NissanTennessee's top economic development official is defending the nearly $200 million that the state is paying Nissan to move its headquarters from Los Angeles to the Nashville suburb of Franklin - incentives given via stealth legislation passed without public debate, by a legislature that was kept in the dark as to the purpose and scope of the tax laws the administration was demanding they pass. Interesting claim in the story: Kisber cited a University of Tennessee report that found that the Nissan relocation is expected to generate more than $500 million annually in income and $20 million in sales tax. It's also expected to directly bring nearly 1,300 jobs and help create an additional 13,000 jobs.How is the relocation of the Nissan HQ going to create an additional 13,000 jobs? And what kind of jobs will they be? The answers are ... unknown, as the Center for Business and Economic Research at UT-Knoxville hasn't released the report. UPDATE: Just noticed some nice comments from Joe Lance at that Chattanooga-Hamilton County Civic Forum blog: I have a friend, a flat-out Boortz fan, who always reminds me that "corporations never pay taxes." (He sez that they just pass the costs along to you an' me, the consumers.) True enough, but read Bill Hobbs' expansion on a recent Tennessean story if you want to learn how some corporations not only get us to pay their taxes - they get us, through our elected government, to give them lots more money that we've already paid in our taxes to the State of Tennessee. ... Regardless of whether you, like some of Bill's commenters, think that the incentive makes a sound investment, just think about the way the related legislation came about. This isn't a partisan thing. Bill and I are hardly ever on the same political platform, but when he's right, he's right.When it comes to honesty and openness in government, Joe and I are on the same page. Posted in Tennessee Government News
Comments
Let me make sure that I get this straight- Tennessee recruits Nissan's HQ to the Nashville area in a relocation that will instantly impact the state's economy and you complain because some legislators were too lazy to learn about what they were voting on. NEWS FLASH: This was NOT a negotiated incentive. The incentives in question are statutory. ANYONE who read the bill or the bill summary should have been able to figure out what this legislation provided in terms of incentives. If the legislators in question could not figure it out on their own, the House has a cadre of staff attorneys that they could have asked. There was NO reason for anyone to know about the potential Nissan relocation nor is it common practice to disclose this information prior to an actual decision being made by the company. Based on the plain language of the bill, Nissan or any other taxpayer, that invests over $1 billion in TN, creates 1000 jobs paying 150% of the avg. manufacturing wage, that spends $50 million on a new HQ facility to TN will qualify for the $50,000 per job relocation expense reimbursement. You should be hoping that other companies are in line to make this kind of investment in the state. Posted by: jessica at December 9, 2005 6:22 PMOne final comment- businesses such as advertising firms, catering firms, law firms and big 4 accounting firms are licking their chops over this move. This is one situation where everyone is a winner. Before you complain too much about this deal why don't you ask any of Nissan's current 5000 plus employees if the incentive package that Gov. Alexander put together to initially get Nissan to locate here was worth the initial investment. I'm pretty sure that I can tell you what the answer will be. Posted by: jessica at December 9, 2005 6:29 PMBill, We have the same thing occurring here in E. Tenn. with Denso. In today's knoxnews.com article, Denso Details Scarce, "Blount County economic developers have declined to release details of incentives offered to Denso Manufacturing Tennessee for the company's $185 million expansion in Maryville, even though those incentives are funded by tax dollars." "The News Sentinel has learned that the Denso incentives may include a local property tax abatement, state-funded road improvements on Middlesettlements Road adjacent to the Denso plant, state job training, state job tax credits that could total $2.25 million and an undefined incentive from TVA. The package may include other incentives." It's the homeowner and other small businesses who will have to make up the difference in higher property or sales taxes because of the "corporate Christmas cheer" being secretly doled out to possible huge campaign donors. Posted by: Rick Forman at December 9, 2005 10:37 PMNewsflash: I'm not against Nissan coming here. I'm not even against economic development incentives in theory, and might even agree that this deal will be a good investment. I'm not objecting to the policy, I'm objecting to the process by which it was passed. What I AM against is that this package was presented as an unexplained amendment just minutes before it was to be voted on. You say: ANYONE who read the bill or the bill summary should have been able to figure out what this legislation provided in terms of incentives. If the legislators in question could not figure it out on their own, the House has a cadre of staff attorneys that they could have asked. In an hour? They were supposed to get a detailed analysis in an hour? You go on to say: There was NO reason for anyone to know about the potential Nissan relocation nor is it common practice to disclose this information prior to an actual decision being made by the company. I understand the need for secrecy as to the company's identity. On the other hand, this legislation isn't just for Nissan. As you point out, it is for any company that meets those standards, which means Tennessee now offers some of the most generous statutory econ/devel incentives in the nation, at great potential cost to taxpayers, and this new policy was passed without public or legislative debate, and without even the option of public or legislative debate. The administration sprung this on the legislature on almost the last day of the session, on the same day that the Operation Tennessee Waltz arrests were happening and the legislature was highly distracted, and even the Senate sponsor of the amendment had no clue what it did or what it was going to cost taxpayers. Once again, to be clear because some of my readers seem unable to understand the difference: I'm not objecting to the policy, I'm objecting to the process by which it was passed. One more thing, Jessica. Nissan ain't gonna change accounting firms just because it moves from LA to Nashville. Whatever Big 4 firm it now uses it will continue to use. Your local accountant may think he has a shot at the bidness now that Nissan is movin' in, but he is delusional. Posted by: Bill Hobbs at December 9, 2005 10:53 PMJessica, Who ends up paying for all these corporate welfare incentives? The Nissans or the small business property owner who sees his property taxes being jacked every 2 years for corporate subsidies that for some reason their small businesses never seem to qualify. This is not free enterprise. It's mercantilism at its best and good ol' Mussolini fascism at its lowest. Maybe a better incentive would be for Tennesse govt to end it's extravagant lifestyle and social engineering objectives and return to its limited form. Talk about growth! Look what happened in Ireland compared to the rest of the European dis-Union. Posted by: Rick Forman at December 9, 2005 10:57 PMRick: They aren't giving Nissan $50,000 per employee being relocated, they are paying Nissan $50,000 PER JOB relocated. Nissan has 1,300 HQ employees. If only 10 of them move here, Nissan will still get $50,000 x 1,300. Now, most corporations that relocate their HQs do so to save money in a variety of ways such as lower real estate costs, lower taxes, and lower wage/salaries in their new home, especially for the support-staff jobs, which they typically won't pay much to help those employees to move across the country. They don't want $40,000/year secretaries to relocate to Nashville, they want to replace them with $30,000/year secretaries and save money. Another BIG thing that relocating corporations do is reduce the number of people on their payroll. In fact, it is a BIG reason companies move - it makes it very easy to reduce the number of employees because many will simply quit rather than move. So, I'd be surprised if Nissan employs 1,300 people in its Nashville HQ any time soon - although you can bet they'll claim to be staffing up toward that number, in order to qualify for the whole $65 million in "job relocation" assistance. Legislators ought to revisit the Nissan incentives statute when they meet next year and amend the langauge for future companies to pay actual employee relocation costs, for employees who actually make the move, not give a "job relocation" for the "relocation" of "jobs." What does it cost to move a "job" to a new city, anyway? For Nissan, it will cost them about $50 million to build a new HQ building, but they'll recoup a chunk of that, maybe all of it, by selling their Los Angeles HQ real estate. Then they'll get $65 million "job relocation" assistance on top of that. Posted by: Bill Hobbs at December 9, 2005 11:08 PMThe news papers made it appear to be an employee relocation expense not job/position relocation. So Nissan eliminates a job in L.A. to cut costs then reassigns the empty position to Nashville and the Tenn. taxpayer pays Nissan a bounty of $50k. Now that's sweet! Anyone know yet how much the lobbyist er consultant is going to make on this deal? It will be interesting to see where the campaign contributions go in the upcoming elections as well as who/what companies or individuals get contracts from Nissan. Remember, Nissan is a private commercial company so there is no open bidding process. Posted by: Rick Forman at December 10, 2005 2:07 PMPost a comment
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