Tag Archives: electrolux

Electrolux Subsidies Total $152,000 Per Job Created

An analysis of the huge, largely state-funded incentives package for a new Electrolux appliance manufacturing plant in Memphis by the Commercial Appeal has a lot of previously-undisclosed details.
In January, local government officials were told in public meetings that the incentive package offered to Electrolux totaled $153.6 million, with most of the funds coming from the state.
That figure did not include the value of local property tax breaks approved by the Memphis and Shelby County Industrial Development Board, which raised the total amount of support to $188.3 million, or about $152,000 per job.
That figure also excluded other pledges made to the company, based on a review by The Commercial Appeal of internal e-mails, contracts and other public documents.
Among the newspaper’s findings:
-During negotiations with the company last fall, the Tennessee Department of Economic and Community Development sent Electrolux a proposal that offered reductions in franchise, excise and sales taxes worth, the state said, an estimated $41.3 million. A revenue department spokesman declined to discuss those tax breaks with The Commercial Appeal, saying state law bars him from talking about individual taxpayers.
-The Tennessee Valley Authority, also in the Nov. 17 proposal, offered an additional $5 million in grants, loans and other incentives on top of a $1.5 million grant that’s been made public. A TVA spokesman also declined comment on the subsidies, calling them “client confidential.”
-Governments are borrowing money to pay for the project, and interest alone will add an estimated $76.5 million over a period of decades, according to public documents. Memphis and Shelby County residents will pay off the debt until 2036 through non-property tax sources, such as local sales taxes and business taxes.
-Although public money is paying for most of the $190 million factory — even reimbursing the company for its purchases of conveyor belts and other equipment — a construction agreement signed with the company in July provides that Electrolux takes over ownership of the property at the “start of production” — the moment when the first product exits the assembly line.
-The city, county and state governments have no written policies to determine which companies will get large cash subsidies in the future, and which will not. The state government is working on some standards, but they’re still not complete.
-Electrolux was exempted from diversity requirements that have been a condition for other companies receiving local property tax breaks.
-Local governments also agreed to keep competing appliance businesses from settling near the factory, and even agreed to pay the company $25,000 per day if they were found to be the cause of construction delays.
-Of all the concessions made in the December contract, the one that may prove the most beneficial to the firm is an agreement by the governments not to try to recover taxpayer money if the company fails to create the required number of jobs or leaves Memphis quickly. At most, Electrolux could lose local tax breaks that have a present value of about $33.9 million, and represent about 18 percent of the $188.3 million in confirmed subsidies.

The CA’s Sunday story package on Electrolux has sidebars, too.
One begins like this:
The only due diligence report Tennessee completed for the Electrolux project was a six-page document that celebrated the benefits and didn’t consider the costs of subsidies. Reports paid for by the Greater Memphis Chamber didn’t consider all the costs, either. None of the reports addressed the possibility that the company would leave early or fail to meet job creation goals.
“The research on the performance of PILOTs (payments in lieu of taxes) in Memphis has always been very weak,” said David H. Ciscel, retired professor of economics at the University of Memphis. “That is, not everybody actually wants to know if there’s a payoff. Because I fear in many cases, there isn’t.”

The other is on Chamber of Commerce power and begins thusly:
In 2004, the Greater Memphis Chamber waged a very public battle against a proposed city of Memphis payroll tax. In 2005, Memphis officials, some still smarting from the opposition, responded by cutting the chamber’s funding. It would be almost two years before the city contributed funds to the chamber.
How times have changed. Today, no other outside organization is linked as closely to city and county governments — particularly the mayors — as the chamber, which has received millions of public dollars the last few years and is the de facto economic development engine for the area.

Miscellaneous TN Politically-Oriented News Notes

Ramsey Backs Business Cost Estimates on Bills
According to TNReport, Lt. Gov. Ron Ramsey supports the idea of having legislative staff calculate the cost to business of legislation under consideration in the General Assembly.
“Right now we’re just ignoring it (costs to companies) and putting it directly onto business,” the Blountville Republican said. “What does this cost a business when we pass a bill?
“In the long run, it will save the state money and save businesses money” to attempt to calculate those costs up front,” he said.

A Chattanooga Photo Voter ID Effort
From the Chattanooga TFP:
State Rep. JoAnne Favors, D-Chattanooga, said she, other elected officials, churches, elected officials, fraternal, community, civic and professional organizations have formed the Tennessee Voters Assistance Coalition.
It is aimed at helping people get proper photo ID by giving them assistance in obtaining documents like birth certificates and providing transportation.

Southerland: It’s ‘Our Turn’ for Megasite
State Sen. Steve Southerland, R-Morristown, says that for folks in Northeast Tennessee “it’s our turn” for creation of a new Megasite for industrial development tells TNReport that moves are underway toward that goal. But…
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.

Estimates Could Cost Electrolux
Electrolux, which is relying on state and local government for much of its funding for a new Memphis facility, might have to reach deeper into its own pocket, reports the Commercial Appeal.
Construction bids for an Electrolux site at Frank C. Pidgeon Industrial Park are about $30 million higher than expected, but company executives and city officials say the Swedish appliance manufacturer remains committed to building the facility.
Sundquists Open Their Home
Don and Martha Sundquist, who moved to Townsend from the governor’s residence, are opening their home to public visits for the first annual “Fall Mountain Home Tour,” Friday, Oct. 28, reports the News Sentinel. It is one of four on the tour, a benefit for the Great Smoky Mountains Heritage Center. He is on the board; she is on the guild.
The house, centered on views of Mount LeConte, is designed around the outdoors. “There are no curtains anywhere in the house,” (Martha Sundquist) says. A waterfall visible from the deck prompts an explanation.
“I wasn’t sure whether I wanted to live on a mountain top or near a waterfall. Don said, ‘you can always build a waterfall later.'” She didn’t have to wait long; the landscaped water feature was her 45th anniversary gift.

Building Commission Signs Off on Industrial Development Handouts

The State Building Commission signed off Thursday on $346.2 million in state taxpayer funding to help build two large industrial plants in Clarksville and Cleveland, Tenn., plus $7 million for the Port of Cates Landing on the Mississippi River in Lake County.
Richard Locker wrote the report:
The $245.9 million in total state funding for the $1.2 billion Hemlock Semiconductor plant in Clarksville and $100.3 million for the $1.1 billion Wacker Chemie polysilicon production plant in Cleveland — plus a previously approved $100 million for a new Electrolux plant in Memphis — represent the first time state government has spent money on the actual construction and equipping of plants.
The projects, previously approved by the legislature, include a combination of current tax revenue and state bonds, to be repaid by general taxpayer revenue.
The new $26.2 million Cates Landing river port under construction near Tiptonville is funded by the $7 million from the state, $13 million from the federal government and $6.2 million in local funds.

Electrolux to Gov: Want More Jobs? Provide More Handouts

An executive of Electrolux told Gov. Bill Haslam that the state should provide more “capital investment” for business if it wants to create more jobs like the $97 million in state money that’s helping build Electrolux’s Memphis plant, reports Rick Locker.
John Terzo, a manager at Electrolux’s Springfield, Tenn., plant, was among dozens of Middle Tennessee business executives who participated in an economic-development “roundtable” Thursday hosted by the governor at a country club in Hendersonville, near Nashville.
When Haslam asked what the executives would do to encourage job growth if they were governor, Terzo cited the state’s financial aid to lure Electrolux to Memphis as a blueprint.
The state is contributing $97 million in taxpayer money toward building and equipping the new $195 million kitchen products plant in the Frank C. Pidgeon Industrial Park. Memphis and Shelby County are adding at least another $20 million each.
Terzo didn’t mention the dollar amount, but told the group that when Electrolux was deciding where to relocate its Montreal manufacturing plant and its 1,250 jobs, it focused on China and Mexico until “the state of Tennessee stepped up in a way to help us with the capital investment.
“To me that is probably the best use of the state’s resources, to create these seeds of opportunity for growth. The state stepped up, along with the county and the city in the Memphis area, and soon we will have 1,250 Electrolux jobs over there and probably another factor of two times that (at) suppliers and support jobs that are going there,” Terzo said.
…Haslam did not respond directly to Terzo’s remarks, but told reporters later that incentives for businesses are required in the competitive environment of job recruitment.
“We’re not going to get out of the incentive business. It’s just not going to happen because it’s too competitive of a world. Our job is to make certain that the deal that we do with those companies makes sense short- and long-term,” he said.
Haslam said he would not second-guess the Electrolux deal, which former governor Phil Bredesen committed to but which Haslam embraced. “I’m not going to go backward. I’m real excited we’re getting 1,200 jobs in Memphis, in an area we really need them right now.”

Haslam: Figuring Out Incentives is Complicated

By Eric Schelzig, Associated Press
HENDERSONVILLE, Tenn. — Tennessee is still trying to come up with a standard approach toward offering incentives for business prospects, Gov. Bill Haslam said Thursday, adding that the task involves complex considerations about how each development deal is structured.
The governor put state development officials to work on a standard approach last March after lawmakers and others began questioning deals struck by Haslam’s predecessor with online retailer Amazon.com and appliance maker Electrolux.
“We’re not going to get out of the incentive business, because it’s too competitive of a world,” Haslam said. “Our job is to make certain that the deal that we do with those companies makes sense short- and long-term.”
Electrolux was promised more than $90 million from the state to help bring a plant to Memphis. And the state agreed to waive a requirement for Amazon to collect sales taxes on items sold through distribution centers being built in Tennessee.

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House OKs Bonds to Fund Electrolux; Kisber Cancels Appointment with Ramsey

Though some members voiced reluctance, the House approved a bill that calls for issuing $106 million in bonds, with most of the money earmarked to provide incentives for Electrolux Inc. to build a new plant in Memphis.
Only Rep. Frank Niceley, R-Strawberry Plains, spoke directly against the legislation, HB2134, declaring it would “steal” taxpayer money from across the state to help just one area and a huge multi-national corporation.
Others said they did not like the need to provide companies with incentive, but there is little choice.
“We can either do that (give incentives to companies) or we can just sink into oblivion from the economic development standpoint,” said McCormick.
The bill passed 91-2 with other representatives either abstaining or listed as not present. The measure now goes to the Senate.
Legislative staff estimates the total cost, once interest and other expenses are paid on the 20-year bond, at more than $173 million.
Meanwhile, former Economic Development Commissioner Matt Kisber canceled a widely reported appointment with the state’s lieutenant governor, reports Joe White.
Ron Ramsey announced last week he would have a meeting with Governor Bredesen’s top business recruiter to ask about the details of business incentive plans struck near the end of that administration. But private citizen Matt Kisber called Ramsey to cancel.

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Total Cost of Electrolux Deal to TN Taxpayers: $173.4 Million

The state’s $101 million commitment to Memphis’ Electrolux plant in the waning days of former governor Phil Bredesen’s term still sticks in Lt. Gov. Ron Ramsey’s craw, reports Richard Locker..
The East Tennessee Republican has previously expressed dismay at terms of the Electrolux deal negotiated in December by city, county, state and Chamber of Commerce officials. He is particularly unhappy about the direct commitment of $97 million cash to build and equip the manufacturing plant and the deal’s lack of a “clawback” provision that would require the company to repay the state if its commitment to 1,250 jobs doesn’t pan out.
Ramsey reiterated his support for the funding because, he said, the state must honor its commitment.
But he’s calling in one of the architects of the deal — former state Economic and Community Development Commissioner Matt Kisber — today to talk about both the Electrolux deal and a separate deal to land two Amazon distribution centers in the Chattanooga area.
Ramsey’s planned meeting with Kisber will occur just hours before the House of Representatives is scheduled to consider a $106.4 million state bond issue to finance $77 million of the Electrolux costs and $29.4 million toward another Bredesen-era project, Wacker Chemie’s polycrystalline silicon manufacturing plant in Cleveland, Tenn. The 20-year general obligation bonds will cost Tennessee taxpayers $173.4 million to repay, including $67 million in interest

Ramsey to Meet With Kisber on Amazon, Electrolux Deals

Republican Senate Speaker Ron Ramsey said Thursday he will meet with the state’s former jobs chief in an effort to learn what deals former Gov. Phil Bredesen’s administration struck when recruiting Amazon and Electrolux to Tennessee.
From Andy Sher’s report:
“This 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,” Ramsey, R-Blountville, told reporters.
“I think those types of programs in the future are going to be looked at very closely before we do it again,” he said.
Ramsey, however, repeated earlier statements he has made that “we’ll honor it.”
He said Matt Kisber, the former economic and community development commissioner, has agreed to meet with him next week.
“I want to know what did we agree to, what’s in writing, what’s not in writing,” Ramsey said.
Efforts to reach Kisber were unsuccessful. Earlier this week, attempts were unsuccessful in reaching Bredesen about the Amazon deal