Wednesday, January 6, 2010

Incentives for Tunica Plant Ok'd

Yesterday, the Mississippi Legislature approved incentives for the Wilh. Schulz GMBH-planned pipe facility in the Delta. The plant will employ 500 full-time workers (average salary will be just over $30K) within five years of its opening. The company will make a private investment of $300 million and the state approved incentives of $35.1 million.

Of the $35.1 million, $15 million is a loan to Tunica County, who will build the building. The building will then be leased to the Shulz Company, and those lease payments will cover the debt service back to the state. Another $20 million of state money will be a bond in case the company defaults on their loan (the company is borrowing $40 million for equipment from banks), so the $20 million will likely not come into play. Another $100,000 will cover the issuance of those bonds.

While I'm excited when any area of the state gets new jobs, typically, when it comes to recruitment-based economic development, I grimace when we get the final tally on how much the state is having to put up. I'm a big believer in a balanced economic development strategy, where we place a major focus on entrepreneurship, and then complement that with recruitment, tourism and retention. Because in many cases, the recruitment game in economic development, over time, has evolved into a contest to see which state will put up the most incentives. While there are other factors that site selectors also weigh (infrastructure, school system, labor force), states bank on being able to provide major incentives to lure employers to the state.

However, I don't believe that was the case in this project. You have an area in the Delta that is starved for jobs. The $15 million in guaranteed incentives come in the form of a loan that will be paid back to the state. There are also solid clawbacks (provisions that give the state the ability to recoup those incentives if the company doesn't hold up their end of the deal) in HB 338. If the company fails to meet the employment benchmarks (500 within 5 years), the state (via the Mississippi Development Authority) can recoup any portion of that $15 million. This protects the state and helps ensure we don't experience another beef plant debacle.

Anyway, HB 338 easily passed the House and then the Senate, all in one day. Questions on the House floor centered on if there were clawbacks (there were), if local residents would be trained (they would be), if local residents would get first dibs on jobs/contracts over people living in neighboring Arkansas and Tennessee (no way to guarantee it, but it's probable) and if the project would follow bid guidelines (they would follow an expedited bid process, which is typical of economic development projects, because it allows construction to begin quicker).

No comments: