By MATT BLOIS
Cities across North America, including Nashville, submitted bids to Amazon last year, hoping to become the site of the tech company’s second headquarters.
In November, Amazon announced plans to split its second headquarters between New York City and Washington D.C. However, the company decided in February not to build a campus in New York because of local opposition to proposed financial incentives.
The contest-style search for a new location led to a nationwide discussion about the costs and benefits of economic incentives for companies looking to expand.
While Amazon never listed Williamson County as a contender for its new headquarters, county leaders have had to calculate those costs and benefits on a smaller scale.
Williamson Inc. CEO Matt Largen, whose organization works to attract new companies and expand existing businesses in the county, said Williamson County generally takes a cautious approach to these kinds of tax incentives.
“It’s going to be the ones bringing lots of jobs. It’s going to be the ones that have a greater economic impact,” he said. “When a company like Nissan comes to town, bringing 1,600, not just jobs but career opportunities. That’s when you have the serious conversation about economic incentives.”
Since 1994, the County Commission has granted tax breaks for 11 different companies. In total, the county and city governments have approved more than $40 million in tax breaks.
Those tax breaks are spread out over several decades, so it’s difficult to calculate how much they are worth in today’s dollars. Altogether, those companies promised to bring in more than 4,000 jobs to the county.
Tax agreements have to be approved by the Industrial Development Board of Williamson County and the County Commission. If the project is in a city, the governing board of that city also has to approve any breaks on city taxes.
The agreements last between five and 30 years. Most companies with these agreements pay between 50 and 60 percent of property taxes. Williamson County Mayor Rodgers Anderson said the county has always protected the portion of property taxes that goes to public schools in all tax agreements.
“That’s why people move here. I don’t want to shortchange our public education, so we never offer that,” Anderson said. “What’s left after public education, we’re willing to talk to you and have a philosophical discussion about what we can do.”
In most cases, the agreements have a time limit and maximum amount of tax that companies can avoid. If the company hits the cap early, the tax breaks end.
For example, Williamson County and the City of Brentwood agreed in 2012 to waive up to $2.4 million in taxes when Tractor Supply brought a new headquarters and 300 jobs to Brentwood.
The agreement allows the company to pay 60 percent of city and county property taxes for 10 years. But if the company avoids $2.4 million in taxes before that, it has to then pay the full tax rate.
The biggest deal by far was the county’s 2005 agreement with Nissan. The company brought its headquarters to Franklin from California, providing an estimated 1,275 new jobs. That deal extends from 2008 to 2037 and is worth somewhere between $18 million and $22 million in today’s dollars.
That agreement sounds expensive, but a 2005 study by researchers at the University of Tennessee’s Center for Business and Economic Research estimated that the wages from new jobs at Nissan will generate more than half a billion dollars in personal income in Williamson County every year.
“The wages, salaries, and other purchases will work through the state’s economy to produce even more substantial impacts,” the authors of the report wrote.
Not all county leaders agree that the economic benefits outweigh the costs. Most agreements had broad support from the County Commission, usually with upwards of 20 votes in favor. But nearly every proposal had at least one vote in opposition.
County Commissioner Judy Herbert said she voted against tax incentives for the expansion of Lee Company’s headquarters in 2016 because the area already has other ways to attract new jobs and new companies.
“Right now we’ve got tons of business. Why give away tax money? We’ve got so many jobs here we’re having to give them to people in other counties that are driving in like crazy,” she said. “It’s a great thing if you are a county that doesn’t have a lot of jobs, but now we have got tons of them.”
Largen and Anderson both agreed that the county already has a lot going for it, but they argued the tax incentives are still an important tool to fuel job growth in the county.
“The reality of the world we live in is they do play a key role at the end of some of these important projects that create opportunities for our residents,” Largen said.
State law requires local governments to conduct a formal cost-benefit analysis with each agreement. The analysis considers the direct impacts, like the number of jobs created, along with indirect impacts, such as the jobs created by extra spending in the local economy.
Most of the agreements also include provisions to hold companies accountable for creating the jobs they promise. A $2.2 million agreement with The Lampo Group — the company founded by finance educator Dave Ramsey — requires the company to pay a penalty if it doesn’t create 80 percent of promised jobs by 2023.
One company failed to meet the requirements in a tax agreement. The Industrial Development Board of Williamson County granted a property tax break for the Franklin healthcare company BioMimetic Therapeutics in 2010.
That company was supposed to create 70 jobs in the first two years, but didn’t hit the mark. The Industrial Development Board voted to terminate the contract in April 2013.
Compared to other governments, Williamson County is relatively forthcoming with information about the tax incentives it has granted. An attorney representing the Industrial Development Board shared nearly all of the tax agreements with Business Williamson, along with relevant meeting minutes.
The Nashville Business Journal requested an agreement detailing incentives for the finance company Alliance Bernstein from the state of Tennessee. The journal reported that all of the information about tax incentives was redacted when it received the document.
The Nashville Business Journal also requested information about the state’s failed bid for Amazon’s second headquarters. The journal reported that the state didn’t provide the information and a judge sealed that information for the next five years.
In an email last year, Largen said there are still dozens of companies considering expansion or relocation projects in Williamson County.
“If any one of those projects land in 2019, it would be the most exciting business story of the year,” Largen wrote.
He didn’t say which companies are eyeing Williamson County. The county doesn’t often offer tax incentives—usually less than once a year since 2005—but if large companies are thinking about expanding in the county tax incentives could play a role in that decision.
Notes on data table
- Williamson County signed its first payment-in-lieu-of-taxes agreement with Primus Automotive Financial Services in 1994. A lawyer representing the Industrial Development Board of Williamson County couldn’t find documentation for this agreement before publication.
- Rather than a maximum tax break, this number is an estimate of the total tax break Nissan will receive between 2008 and 2037. Researchers from the University of Tennessee estimated this would be worth about $18.5 million in today’s dollars.
- Verizon’s agreement doesn’t have a maximum tax break. In 2013, the last year of the tax agreement Verizon paid about $275,000 in property taxes. The next year it paid about $463,000 in property taxes, according to data from the Williamson County Trustee’s office.
- Jackson National Life Insurance paid 100 percent of the property taxes allocated for education.
- BioMimetic’s agreement doesn’t include a maximum tax break. That company was supposed to create 70 jobs in the first two years, but didn’t hit the mark. The Industrial Development Board voted to terminate the contract in April 2013.
- Williamson County granted BioMimetic a 100 percent tax break for the first three years, a 75 percent tax break for the following three years and a 50 percent tax break for the last three years. Those percentages apply to the portion of property tax not allocated for public schools.
- The Mars Petcare agreement doesn’t have a maximum tax break.
- Mars Petcare paid 50 percent of its property taxes for the first year of the agreement, and 60 percent for the remaining nine years.
- Lee Company paid 100 percent of the portion of property taxes allocated for education.
- The Lampo Group’s agreement included two phases. This is the maximum tax break for both phases.
- The Lampo Group paid 100 percent of the property taxes allocated for education.