By Scott Robertson
If the as-yet publicly-unnamed German HVAC company that’s been considering moving to Washington County decides to take its 179 new jobs elsewhere, it won’t be the fault of the county or city governments or the economic developers working on their behalf. Before Monday night’s Washington County Commission meeting, there had been some question in that regard.
A very public kerfuffle over whether the county would offer incentives on the John Sevier Hotel deal a couple of months ago had created uncertainty over whether this county commission would approve any economic development incentives. “If we don’t approve this,” one commissioner told me, “we might as well just tell TVA and the Tennessee Department of Economic and Community Development (who between them provide Tennessee communities with the leads that produce around 90 percent of the new company locations every year) that we’re not interested in economic development for the next four years.”
The Johnson City Commission had already done what it needed to do, approving a rezoning that will allow the company to use a building in Johnson City for three years while it builds out its space in the Washington County Industrial Park. But that commitment took zero dollars. The county, on the other hand, needed to approve a payment-in-lieu-of-tax (PILOT) agreement.
Fortunately, the county commission was receptive to math.
Alicia Summers, vice president of business development for the Northeast Tennessee Regional Economic Partnership, told commissioners that the creation of the site at the industrial park had cost $1.17 million to prepare, and that the German company was willing to pay $1.2 million to the Washington County Industrial Development Board (IDB) for a three-year option, with $400,000 due at closing and $400,000 more over the first four months of the option. After closing, even when the incentives during the early years of the deal are still in effect, the company will pay roughly $59,000 a year in taxes designated to support the county school system.
“The company gave no pushback to that at all,” Summers told commissioners, noting the company’s awareness that the workforce that it would depend on would be coming, in large part, up though the county schools.
So, that’s $59,000 a year from a plot of land that is currently adding $0 to the tax rolls. After the first three years on the property, the company will begin paying more and more taxes on a 10 percent incremental basis.
All that accrues before one even considers the company’s capital investment. All that is before one considers the first new job.
“Sometime in August or September, their plan is to create 60 to 68 new jobs and invest about $8 million in the machinery and equipment,” Summers said. “In the second year, they plan to continue with assembly and create around 16 more jobs. They’ll bring in around $1.4 million in equipment.”
In 2021, the company will still occupy the Johnson City space, but will begin the build-out of the industrial park site, which will continue into the next year. “They anticipate occupying the building, creating more jobs and having over a $25 million investment in the building,” Summers said. “In year five they’ll do another push for new jobs and then some more capital investment.”
At a time when the national economy is in the longest upswing in our lifetimes, the economy of this region has remained stagnant. We need growth. The county commission had the wisdom to see it made sense to offer this deal.
Commissioners did not just rubber-stamp the deal, it must be said. Commissioner Robbie Tester raised his long-standing objections to incentive packages of all shapes and sizes. Commissioner Kent Harris pointed out the fact that NN Inc., has recently announced it is leaving the county entirely despite an incentive package it received, and for which the county will have to pursue restitution. The impending departure of ALO from the same industrial park also received attention from Harris, who asked Summers pointedly about NETREP’s work with existing employers.
To her credit, Summers did not try to paint an overly rosy picture. She explained the accountability clause that will hold the German company financially responsible if it fails to meet its job creation goal of 179 new positions. She also said that while having a new client in the park would make it easier to market the park’s remaining properties, this deal would in no way guarantee other businesses would move here soon.
All that having been said, the commission decided that with a commitment of 179 new jobs and capital investment of $37.5 million, the deal was worth it on its own merit. The county will get a taxpaying corporate citizen on a piece of property that has been adding nothing to the tax base and new jobs will be created.
With the county IDB having done its part within hours of the commission vote (the IDB met Tuesday morning), the ball is in the company’s court. It is expected to announce whether it will locate the new facility here within the next two to four weeks. Washington County is competing with another Tennessee community and a community in Texas for the project.