Tennessee’s economic development strategy has raised the stakes in the corporate giveaway game. In 2008 the state assembled a $577 million deal for a Volkswagen assembly plant in Chattanooga, the largest subsidy package ever offered to a foreign automaker in the United States (see below). This followed a controversial 2005 deal in which Nissan was given $197 million to move its North American headquarters to the state. Among other things, the company was made eligible for reimbursements of $50,000 per employee for relocation expenses.
More recently, Hemlock Semiconductor and Wacker Chemie were each offered packages worth about $100 million for factories producing polysilicon, a key component of solar panels and computer chips (see below). In late 2010 the Swedish company Electrolux announced plans to build an appliance plant in Memphis that received state and local subsidies estimated by the Memphis Commercial Appeal to be worth $188 million.
Tennessee offers several kinds of tax credits and multiple training subsidies. The Headquarters Tax Credit allows sales and use tax credits in addition to the relocation expense refunds mentioned above. Businesses receive credits for up to 50 percent of their franchise and excise taxes through the Jobs Tax Credit. Companies which qualify for FastTrack Job Training Assistance are refunded the cost of this customized training program.
Despite the fact that some deals are known to have nine-figure costs per company, neither costs nor benefits are detailed online by the Volunteer State. At the time of our report, Tennessee did not disclose recipient name, cost, or outcome data for any of the major subsidy programs we examined. Even annual program costs were not provided for three of the five. In mid-2012 the state began disclosing recipient data for its FastTrack Job Training and FastTrack Infrastructure Development programs as well as its film subsidy (though the latter did not include the names of the production companies).
Department of Economic and Community Development grant award dollar totals are shown by county in a 2007 Performance Report available here. No individual project details are disclosed.
Key Subsidy Programs
|Subsidy Program||Recent Annual Cost||Online Recipient Disclosure||Recipient Disclosure Score*||Job-Creation/Job-Quality Score**||Monitoring/Enforcement Score***|
FastTrack Job Training Assistance
businesses are refunded the cost of providing customized workforce training. (Disclosure began after our report was published.)
|$6 million (2010)||
Headquarters Tax Credit
sales and use and other tax credits for corporate headquarters projects which meet job creation, wage, and investment requirements
Jobs Tax Credit
franchise and excise tax credits for job creation and investment (subsidies vary by geographic area)
|$25.2 million (2012)||
Sales and Use Tax Credit for Qualified Facility to Support an Emerging Industry
tax credits for firms which create high-skill, high-wage jobs and meet minimum job creation and investment requirements
Tennessee Job Skills
training reimbursements designed to encourage job retention and expansion by existing businesses
|$5.3 million (2012)||
* The score is derived from the Good Jobs First report Show Us the Subsidies (December 2010).
** The score is derived from the Good Jobs First report Money for Something (December 2011).
*** The score is derived from the Good Jobs First report Money-Back Guarantees for Taxpayers (January 2012).
Major Subsidy Deals
Volkswagen, which had given up on producing cars in the United States in 1988 after the failure of its plant in Pennsylvania, decided to give American workers another chance. In July 2008 the German automaker announced plans to spend up to $1 billion on an assembly operation in Chattanooga. Expecting the plant would create about 2,000 jobs, the state rolled out the red carpet. State officials and the company initially were mum about subsidies, but reporting by the Chattanooga Times Free Press revealed that the state and local subsidy package was worth in excess of $400 million. The total was later put at about $577 million, making it the richest subsidy deal ever offered in the United States to a foreign automaker. A local group has criticized the project for using out-of-state and foreign contractors and workers in the construction of the plant. Production began in May 2011. (Key sources)
Hemlock Semiconductor (2008) and Wacker Chemie (2009)
The announcement by Volkswagen that it would build an assembly plant in Chattanooga turned out to be only the first of three billion-dollar deals negotiated by Tennessee. In December 2008 Hemlock Semiconductor, a joint venture of Dow Corning and two Japanese companies, announced plans for a $1.2 billion plant in Clarksville (near Nashville) to produce polycrystalline silicon, the key component of solar power panels and computer chips. The state provided a subsidy package that included $100 million in infrastructure development as well as $11.4 million in training grants. The company was also offered some $74 million in local subsidies, including low-cost land and a 23-year, 50 percent local property tax abatement worth an estimated $40 million.
Two months after the Hemlock deal came to light, Germany’s Wacker Chemie announced that it would locate another polycrystalline silicon plant in Tennessee, this one in Cleveland, in the southeastern corner of the state. The $1 billion project was given a subsidy package reportedly worth $75 million to $100 million in infrastructure improvements, tax credits and job training grants. The Hemlock and Wacker projects also qualified for a program Tennessee enacted in 2008 under which the cost of any future carbon taxes for major green-energy supply-chain projects will be paid by the state. Both companies have also received federal renewable-energy subsidies. (Key sources)
Wal-Mart in Tennessee
- At least 4 Wal-Mart locations have received subsidies worth $11.6 million in Tennessee.
- At least 3 Wal-Mart locations in Tennessee have challenged their property tax assessment.
- Wal-Mart was found to have more workers than any other employer in the state relying on publicly-funded health insurance. This shows how taxpayers end up subsidizing Wal-Mart’s policy of providing low wages and inadequate benefits.
For more information, see the Tennessee page of Wal-Mart Subsidy Watch.