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.
In 2009, 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. On a local level, the main subsidy program is Payment of Lieu of Taxes, or PILOT, a form of property tax abatement. The issue of PILOTs has been especially problematic in Memphis. In 2013, the city abated about 14 percent of its property tax base and lost about $42 million in revenue that year.
In mid-2012 the state began disclosing recipient data for its three FastTrack programs, Tennessee Job Skills program as well as its film subsidy (though the latter did not include the names of the production companies). The Tennessee Board of Equalization lists all companies in the state that have PILOT agreements with counties. The list, however, does not include the value of the abatements.
- Show Us the Subsidized Jobs rank among the states: 29th
Key Subsidy Programs
|Subsidy Program||Recent Annual Cost||Online Recipient Disclosure||Recipient Disclosure Score*||Job-Creation/Job-Quality Score**||Monitoring/Enforcement Score***|
grants for infrastructure improvements (FastTrack Infrastructure Development), customized worker training (FastTrack Job Training Assistance), and grants or loans for activities not covered by the two other programs (FastTrack Economic Development Program)
|$16.5 million (FY2011)||
|41/100||35/100 (FJTA only)||38/100 (FJTA only)|
Headquarters Tax Credit
sales and use and other tax credits for corporate headquarters projects which meet job creation, wage, and investment requirements
|$20 million (FY2011)||
Jobs Tax Credit
franchise and excise tax credits for job creation and investment (subsidies vary by geographic area)
Tennessee Job Skills
training reimbursements designed to encourage job retention and expansion by existing businesses
|$3.5 million (FY2011)||23/100||50/100||45/100|
* The score is derived from the Good Jobs First report Show Us the Subsidized Jobs (January 2014).
** 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 2011. Three years later, after being pressured by its German unions, VW decided to create a Works Council at the facility, and the United Auto Workers sought to organize the workforce. To block unionization, some public officials threatened to deny the company subsidies it had negotiated in connection with a plant expansion. Subsequently, a majority of the workers voted against the union. VW, nonetheless, created the council and proceeded with the expansion after being approved for $260 million in subsidies. (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.