PILOT takes flight in Washington County

Robert Houk • Updated Apr 23, 2019 at 10:58 AM

Washington County commissioners voted 10-4-1 Monday to approve a 13-year tax abatement agreement as part of a deal to lure a German manufacturing company to the Washington County Industrial Park.

“We are here, we just need to cross the finish line,” said Alicia Summers, vice president of business development for Northeast Tennessee Regional Economic Partnership, who said the county has been in negotiations with the company since March 2018.

The payment-in-lieu taxes agreement, or PILOT, calls for the unnamed company to create 179 new jobs and make a $37.4 million capital capital investment in Washington County during a five-year period.

The global company, which makes fans, motors and other heating and cooling components, has agreed to spend $1.2 million to buy 30 acres in the industrial park to build a 110,000-square-foot plant.

The German company would become the fourth manufacturer to locate in the industrial park, which is located on U.S. Highway 11E in Telford. Bush Hog, now a Swedish company called ALO-TN, was the first to locate there in 2001. Two Japanese companies — Koyo/JTEKT and Nakaetsu Machining Technologies — joined it in 2006.

As part of tax abatement plan, Johnson City commissioners voted in February to rezone a tract on East Millard Street for the company to use an empty warehouse as a temporary production facility.

According to the PILOT, the company has agreed to create 68 jobs in the first phase, followed by 16 more in 2020, when the company is expected to begin limited production in a leased building outside the industrial park.

The company plans to begin construction of its facility in the industrial park within 24 to 36 months of the PILOT being implemented by the county’s Industrial Development Board, which meets today to vote on the deal.

The new jobs are expected to pay an average yearly wage of $37,193. The median annual wage for the Washington County is now $30,763.

Summers said the company is also is talks with two other suitors — another in Tennessee and one in Texas. She said the company is expected to make a decision on where it will locate sometime within 30 days following the County Commission’s vote Monday night.

The PILOT calls for the abatement of all taxes by the company during the first three years, followed by property taxes being levied at increasing 10 percent increments in each of the next 10 years until the company is paying its full tax bill.

Personal property, such as manufacturing equipment, would face no taxes in the first three years and then be taxed annually at the full rate.

Economic officials say the PILOT will result in Washington County collecting $2.1 million in new property revenues in the next 15 years. The project is also estimated to generate $59,000 annually for education during the same period.

“This is new for us,” Summers said of the education provision, which starts at the beginning of the PILOT. “There was no push back from the company.”

Commissioners Jerome Fitzgerald, Bryan Davenport, Larry England, Freddie Malone, Suzy Williams, Phil Carriger, Jodi Jones, Gary McAllister, Greg Matherly and Jim Wheeler voted in favor of the PILOT. Commissioners Steve Light, Kent Harris, Danny Edens and Robbie Tester voted against it.

Commissioner Mike Ford was absent.

During Monday’s debate, several commissioners said they are worried the company might not live up to all its promises under the deal. Opponents of the tax incentive plan pointed to news last week that NN Inc. plans to completely close its Johnson City operations by the end of June.

The company, which is currently under a PILOT, has already shut down its local manufacturing plants and has moved its headquarters from Johnson City.

Tester said tax abatement plans are “short-term incentive deals,” which might make companies “more likely to leave” once they are completed.

“These deals put cities, counties and states in endless bidding wars,” he said. “In the long run, are these deals really best for our constituents?”

England noted local governments have little choice in the matter.

“If we don’t compete in the game, they (companies) will go elsewhere,” he said.