Tag Archives: economic

TNInvestco has run through $200M, results unclear

TNInvestco, established with $200 million in state taxpayer funding to finance startup companies, is almost out of money, reports The Tennessean, and so is a similar federally-funded program called INCITE.

After citing a startup that got $4 million from TNInvestco and INCITE and is doing pretty well, the article goes on to raise questions about whether taxpayers will ever get their money back, which was part of the TNInvestco plan sold to state legislators when it was approved.

Just $17 million remained as of 2014 — the most recent year financials are available. The state’s $30 million INCITE program, a federally funded initiative run by Launch Tennessee, is down to $2 million as of 2015.

TNInvestco and INCITE have been critical drivers in developing the state’s startup growth, helping to build accelerator programs and attract more private capital to Tennessee companies — more than $325 million to date.

…TNInvestco has become a sparkplug for Tennessee’s startups and it has spurred job creation across the state. It has also put private investors on track to make millions and yielded millions in tax savings for insurance companies. But TNInvestco is a long way from repaying taxpayers.

In 2009 Tennessee lawmakers approved $200 million to fund TNInvestco. By enlisting private fund managers to invest the state’s money and insurance companies to help pay for the program, TNInvestco would support small business growth and create jobs. There was also the expectation that the state would recoup its massive investment.

…The TNInvestco program was pitched to Tennessee lawmakers as a jobs bill, but the descriptions that bill sponsors and state officials provided were often confusing, misleading or incorrect. But in a time when the national economy was still reeling, the bill received nearly unanimous bipartisan support.

The problem is in TNInvestco’s design: It forces the state to bear all the risk and see only half of the proceeds, providing far more profits to the managers of 10 TNInvestco funds than they would make in the private markets. Tennessee also loses millions through the sale of tax credits to fund the program, tens of millions that could be spent on funding schools, roads or more early-stage companies.

..As of 2014, 10 of the 175 companies that have received TNInvestco funds sold for a profit, and if returns were distributed, the state would lose money on all but four of those deals. Fifty more companies have closed or sold at a loss. The reinvestment period extends until 2017, which means that the TNInvestco investors’ early returns still have the potential to strike gold in a new investment or to fizzle in a failed company. But, if the 10 funds had to distribute returns in 2014 on those 60 company sales or writedowns, the state would gain close to $10 million on $21 million invested, booking a more than $11 million loss.

TN tops in direct foreign investment ($30B, 864 companies)

NASHVILLE, Tenn. (AP) — Tennessee has been ranked the top state in the nation for foreign direct investment job commitments in 2013.

That’s according to the recently released 2014 Global Location Trends report.

The annual report from the IBM Institute for Business Value measured the number of jobs created by foreign-owned companies in each state during the 2013 calendar year. Following Tennessee in the rankings were Texas, Georgia and Ohio.

Tennessee is home to 864 foreign-based establishments that have invested over $30 billion in capital and employ more than 116,000 Tennesseans.

The state’s top 10 countries for FDI include Japan, Germany, Canada, United Kingdom, South Korea, France, Italy, Switzerland, Sweden and Belgium.

Building commission OKs $520M for UT projects; $27M for West TN megasite

The State Building Commission has signed off on various phases of new building, campus beautification, improvement and repair projects totaling $520 million at the University of Tennessee Knoxville that when completed will transform the Knoxville campus and the student experience there, Richard Locker reports for the News Sentinel.

The largest is the planned $234 million “West Campus Redevelopment” project — the demolition and replacement of the iconic Presidential Court Complex, a brick and concrete housing and dining behemoth built in the 1960s that has been home for generations of students mostly in their freshmen and sophomore years.

…Other projects include a new $99 million, 222,000 square-foot science laboratory building on Cumberland Avenue, a large new $99 million 684-bed apartment residence hall on the site of the recently demolished Gibbs Hall, $15 million worth of maintenance and upgrades to Thompson-Boling Arena, and $8.5 million in campus beautification projects.

…UT President Joe DiPietro presented the projects to the State Building Commission in Nashville Thursday.

… “We sorely need these. We have the first new dormitory at Knoxville going up right now. Dorms are a big issue from the standpoint of recruiting for UTK,” DiPietro told the commission.

The Building Commission also released $27 million for a West Tennessee industrial development, money that officials say will be used to reroute a state highway, according to the Tennessean.

The State Building Commission approved a plan Thursday to expand the budget for the Memphis Regional Megasite, a 3,840-acre industrial park under construction next to Interstate 40 between Jackson and Memphis.

The commission’s executive subcommittee also agreed to let the Department of Economic and Community Development acquire 265 acres for the megasite, much of it to move State Route 222 and reconnect it with the interstate.

The approvals are part of a push by Gov. Bill Haslam’s administration to complete work on the megasite in the hope it will attract an automaker. Development began nearly a decade ago under former Gov. Phil Bredesen, who pitched the site as a center for solar panel manufacturing.

State incentives to Eastman equal $100K per job

Gov. Bill Haslam’s administration has touted its ability to give taxpayers more bang for their buck when it comes to economic development by leveraging increasingly smaller grants for projects that promise more jobs than deals under previous governors.
But, reports The Tennessean, the administration deviated from that pattern when it doled out $30 million to Eastman Chemical Co. in May.
Eastman has promised to pump $1.6 billion of its own money into renovating and expanding its facility in Kingsport, where the publicly traded company has operated since 1920. The chemical manufacturing company is the largest employer in northeast Tennessee and one of the largest in the entire state.
But Project Inspire, as it has been dubbed by company executives and public officials, comes with relatively few predicted new jobs considering the state’s investment. Eastman has promised 300 new jobs, which comes out to $100,000 in taxpayer incentives per anticipated job.
During his first two years in office, the Haslam administration has spent an average of $3,104 in incentives per new job, a statistic the Department of Economic and Community Development has highlighted in its annual reports as evidence the program is being run more efficiently than in the past.
ECD spokesman Clint Brewer acknowledged that Commissioner Bill Hagerty used the incentives-per-job metric to track how efficiently the department is operating. But Brewer said the Eastman package compared favorably to other incentive deals when considering the state’s relatively small contribution to the overall project. The $30 million in taxpayer funds amounts to just 1.9 percent of the overall $1.6 billion project, and by that measure Brewer said taxpayers are still getting high value for their investment in Project Inspire.
Eastman Chemical employs 6,750 workers in Tennessee, plus 2,500 contract workers and has 6,200 retirees drawing pension and retirement benefits. The company, which has deep political connections, has flexed its muscle by spending significantly on state legislative campaigns in recent election cycles. It also employs Tom Ingram’s firm, The First Group, to represent its interests in Washington, D.C.
Ingram helped Haslam with his 2010 election campaign and has been personally paid by Haslam to advise him while he was governor. Last week, Haslam said he is putting Ingram back on his campaign payroll after complaints that Ingram lobbied other state officials at the same time he worked as his personal adviser.
…As is often the case in economic development packages, there were whispers of Eastman looking to move some of its operation outside Tennessee. State Rep. Tony Shipley, R-Kingsport, said he heard other states were trying to woo Eastman. Shipley said even losing a fraction of the workforce, or missing out on the 300 new jobs, would have seriously hurt the community.
When the incentive deal was announced last month, Haslam told local media that he didn’t want to be the governor when Eastman decided to expand somewhere else.
Asked whether moving facets of its operation out of Kingsport was an option, Eastman spokeswoman Kristin Sturgill said “it always makes sense to consider options before making a large investment.”

Hemlock, Beef, Film Incentives Make ‘Pork Report’ List

News release from Beacon Center of Tennessee:
NASHVILLE – The Beacon Center of Tennessee today released its eighth annual Tennessee Pork Report, exposing more than $511 million squandered by state and local governments over the past year. The annual report published by the Beacon Center, the state’s leading free market think tank and taxpayer watchdog, is the only one of its kind in Tennessee.
Examples of wasteful spending outlined in the 2013 Pork Report include:
•A corporate welfare deal gone sour, costing taxpayers $95 million after Hemlock Semiconductor closed its plant and laid off hundreds of workers;
•$73 million in improper unemployment benefits, including cash paid to existing state workers and the deceased, of which only $15.3 million has been recouped;
•Wasteful film incentives to Hollywood elites totaling $13.5 million;

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TN Gets ‘B’ in Manufacturing Business Climate

Tennessee is a strong in manufacturing, but production growth is limited by Tennesseans’ relatively low level of educational achievement, says a Ball State University study. From the Commercial Appeal’s brief story:
The 2013 Manufacturing and Logistics Report Card, an analysis from Ball State’s Center for Business and Economic Research (CBER), grades all 50 states on factors that lead to success.
Tennessee received these other grades: Logistics, B+; Human Capital, D-; Worker Benefit Costs, B+; Tax Climate , C; Expected Liability Gap, B; Global Reach, B; Sector Diversification, B; and Productivity and Innovation, C-.
“This year the state saw the scorecard register improvements in tax climate and the expected fiscal liability gap,” ” stated Ball State’s Michael Hicks, CBER director and economics professor.
“These two changes suggest that Tennessee will see improved prospects for manufacturing. Still, the only real constraint to making goods in Tennessee remains the quality limitations of the workforce.”

The report is available at: cms.bsu.edu/academics/centersandinstitutes/bbr/currentstudiesandpublications

Memphis Paper Company Wants $57M in Tax Breaks — or Else

International Paper wants $56.9 million in tax breaks over the next 15 years and, if it doesn’t get them, threatens to move jobs out of its Memphis facility, according to the Commercial Appeal.
(If given the tax breaks) the company commits to retain 2,274 high-paying jobs in Memphis, add 101 new ones and invest $115.7 million, including construction of a fourth office tower at its East Memphis corporate headquarters.
The company has filed its application for a retention PILOT, or payment in lieu of taxes. The Economic Development Growth Engine (EDGE) for Memphis & Shelby County is to vote on the application Wednesday.
International Paper’s application detailed the company’s options if the EDGE board were to deny the tax break.
“Move a significant number of its high-paying jobs from Memphis to Ohio, where it currently owns facilities which could house these workers — a decision that could also presage Memphis’ loss of additional existing jobs to Ohio, as well as the loss of future growth to Ohio …,” the application states.
A second option would be to move International Paper’s corporate headquarters to a newly constructed campus outside Tennessee. “This is the lowest cost option for IP …,” the document states. There’s been some speculation the company was considering a move to DeSoto County.

TN Expands Operations in Four Foreign Countries

Tennessee is opening four offices abroad in efforts to expand the state’s exports of products and services, which already total $30 billion annually, according to the Tennessean.
Export development offices are being set up in China, Mexico, Germany and the United Kingdom with the goal of increasing the state’s exports by 10 percent — or $3 billion — over the next three years, said Bill Hagerty, commissioner of the Department of Economic and Community Development.
The initiative will be led by the department’s International Division, and it will be the first time since 1997 that the state has operated offices abroad “solely dedicated to advancing Tennessee exports,” the department said in an announcement.
In picking the four countries for the export initiative, “We basically just ran the math and put them where the largest flow (of Tennessee exports) exists today,” Hagerty said. The office in Germany will serve the entire European Union.

UT Athletics Economic Impact: $151M Per Year ($28M in tax revenue)

KNOXVILLE, Tenn. (AP) — A study says Tennessee’s athletic department has an annual economic impact of approximately $151 million to the state of Tennessee.
The study by the university’s center for business and economic research measured the athletic department’s economic impact for the 2011-12 fiscal year. The study estimated that over 2,900 jobs are created annually as a result of combined annual spending by the athletic department and fans attending Tennessee football, men’s basketball and women’s basketball games.
The report also indicated that the Tennessee athletic department raises over $28 million in state and local revenues each year. That figure includes slightly over $20 million in state and local sales taxes, $1.55 million in amusement taxes on ticket sales at Neyland Stadium and Thompson-Boling Arena plus $6.3 million in other tax revenues.

Ramsey Names Kristi Stanley to Economic Council for Women

News release from Lt. Gov. Ron Ramsey:
NASHVILLE – Lt. Governor Ron Ramsey today announced the appointment of Kristi Pruitt Stanley to the Tennessee Economic Council on Women.
“Kristi Stanley is the kind of strong conservative woman who will make a positive impact on the economic lives of Tennessee women,” said Lt. Governor Ramsey. “Her experience as an advocate on behalf of those who create jobs gives Kristi a keen insight into how women can become empowered economically. I look forward to her contributions on the council and I applaud her willingness to serve Tennessee.”
A longtime director of government affairs for the Memphis Area Home Builders, Stanley has worked for two Tennessee Congressman, Rep. Marsha Blackburn and Rep. Stephen Fincher as well as the Shelby County Trustee. Stanley is currently a government affairs specialist for Caissa Public Strategy in Memphis.
“I’m grateful to Lt. Governor Ramsey for offering me the opportunity to serve our state,” said Stanley. “I look forward to getting to work on behalf of women across the grand divisions of Tennessee.”
The Tennessee Economic Council on Women is a state agency created under TCA § 4-50-100 in 1998 to assess economic status of Tennessee women. The Council’s mission is to develop and advocate for solutions to help women achieve financial independence and economic autonomy.

Note: Betsy Phillips offers some commentary on the appointment.