Nissan Helped Develop State Law To Give Company Millions

From Nashville Tennessean:

Lawmakers may have been in the dark, but Nissan North America's consultant wasn't when a new law came up for a vote last summer that would mean millions more taxpayer dollars for the car company if it moved to Tennessee.

That's because the Nissan consultant helped develop the policy while the elected representatives who were voting on it were given little or no information about how it could affect the state's coffers.

The amendment has resulted in Nissan being eligible for a $50,000 reimbursement per employee for moving expenses when Nissan relocates its North American headquarters to Williamson County next year.

Altogether, the moving-expenses law, written at the request of Mark Sweeney, Nissan's paid site-selection consultant, gives the company a $64 million bonus above what the state's standard incentives packages had been in the past.

The midsummer policy change — part of one of the richest headquarters relocation deals in recent U.S. history — has raised eyebrows around the state Capitol, where the bill whizzed through the General Assembly.

Some lawmakers who voted against the legislation in May say they still aren't sure exactly what the law does or whether it's a good policy for the state.

"I think the verdict is still out," said state Rep. Beth Harwell of Nashville, who was among 17 Republican House members who voted against the bill.

The major shift in Tennessee's policy on business incentives passed both houses of the General Assembly with virtually no discussion and with most lawmakers in the dark about which company the new rules would benefit.

The policy change took place after Sweeney told officials with the Tennessee Department of Revenue and Department of Economic and Community Development what other states were paying to attract corporate offices, and he suggested it was time to start paying companies for their moving costs.

Tennessee Economic and Community Development Commissioner Matt Kisber said Sweeney is one of several site-selection professionals he turns to for advice, and he listened when Sweeney talked about beefing up the state's headquarters incentives package. "He definitely said to us that you need to look at relocation assistance. It's got to be a part of a package like this," Kisber said.

Moving can cost a company between $50,000 and $100,000 per employee, and being able to have the state cover those costs was very important, Sweeney said when asked recently about his role in the incentives.

"That can be a very large cost and a very large deterrent to having a project move forward, even if there are compelling strategic or other reasons to do it," Sweeney said.

Until this year, the state did not give direct payments for the cost of moving a business and its employees, as other states have done.

The new law, passed about five months before the Nissan move was announced, limits the reimbursement to $50,000 per relocated job. Which costs are covered are at the discretion of the state commissioners of revenue and economic and community development.

"Tennessee has made themselves extraordinarily competitive for large relocation projects with that incentive," said Sweeney, a consultant with South Carolina-based McCallum Sweeney, one of the top site-selection companies in the nation.

While it's not unusual for a company's lobbyist to be involved in writing legislation that benefits his or her client, it's a practice that has drawn the ire of government watchdog groups for years.

"It just points out the need for full disclosure," said Ben Cunningham, a volunteer with Tennessee Tax Revolt, a group that's been involved in ethics reform efforts.

The group advocates opening the legislative process as follows: "Having this information on the Web so people can easily access it, having full disclosure so that citizens can get involved in the process, so it's not a closed loop where rich or highly paid lobbyists dominate the proceedings."

There's little or no dispute that the Nissan headquarters move will be good for the area's economy. But a handful of lawmakers who voted against the state's plan have voiced concerns about the way the law was presented and a lack of information made available by the Bredesen administration when they were asked to vote on the changes as part of a larger tax bill.

"We never had a chance to read the bill," state Rep. Susan Lynn, R-Mt. Juliet, said. "If we had read the bill prior to discussion, we still wouldn't have known who the bill was for."

The headquarters-relocation provision was tacked on as an amendment on the Senate floor shortly before it passed unanimously on May 25. The House discussion a day later on the same bill lasted less than five minutes.

Sen. Jim Kyle Jr., D-Memphis, who sponsored the bill and the amendment that changed the law, said he introduced the amendment at the request of the Department of Revenue. He didn't know who the bill would benefit and didn't ask.

"I could see what it was about," Kyle said. "I knew they were working on some things, and they thought this was a good provision. I didn't think I needed to know any more, and I didn't ask any more. I'm a team player."

The bill came before the House on May 26, at the end of a long day that started with the arrest of four lawmakers in the Operation Tennessee Waltz federal bribery sting.

A recording of the House session available on the Internet showed that the bill passed 75-17 with two present and not voting.

Overall, Nissan stands to receive more than $197 million in state and local incentives to move its headquarters from Gardena, Calif., to Franklin, including $64 million for moving costs and $80 million in job-creation tax credits.

It's one of the richest headquarters relocation incentive deals in recent times, beating Boeing Co.'s move from Seattle to Chicago in total incentives and incentives per employee.

Sweeney's firm was involved in both deals.

State officials acknowledge that the Nissan headquarters incentives package is large. But they expect the state to recover those costs quickly because the 1,275-person headquarters is projected to generate more than $526 million a year for the area's economy.

Reagan Farr, deputy commissioner for the Department of Revenue, said he wrote the bill using information that Sweeney provided, as well as input from Kisber and his staff.

Kisber said Sweeney's advice was valuable, but the policy provision, which ties reimbursement costs to other large industrial projects, came from the Department of Revenue.

"He said you've got to look at some of the revenue streams you've got and what makes sense for you in terms of how to structure it," Kisber said of Sweeney. "He definitely gave us the working parameters.

"Reagan and (Revenue Commissioner) Loren (Chumley) worked to fully develop the concept. He was not involved in the details of it. When it was drafted, he reviewed it and commented on it."

Farr and Chumley are both tax attorneys.

It is common for states to write laws for a specific economic development project. The laws are usually written in conjunction with the prospective company and are written in such a way that few companies could qualify for them, said Bill King, chief editor of Expansion Management magazine.

"A lot of these big expansions or relocations are unique," King said. "They're one of a kind — like Mercedes going into Alabama or BMW in South Carolina. It's not unusual at all that special legislation has to be drafted. This is true in every state."

The law says that for a company to be reimbursed for moving costs, it must have already spent more than $1 billion and created more than 1,000 jobs that pay 150% of the state's average industrial wage.

It must also spend at least $20 million and employ 200 or more people who make more than twice the area's average salary, or spend $50 million or more on its headquarters building.

Few companies could qualify for that benefit, and Nissan is the only one in the state that does.

Kyle said he thinks the rule is good policy.

"I would say we make money every time someone does that. I don't think it costs us any money," Kyle said. "I hope the next company that wants to do that is in Memphis, if you want to know the truth."

"Anybody that wants to invest $1 billion in infrastructure, build a $50 million headquarters and transfer their headquarters, I think the city of Memphis would give them $50,000, much less the state."

House Majority Leader Kim McMillan, D-Clarksville, who sponsored the House version, pitched the bill as a routine clarification of tax laws.

McMillan told her colleagues that it had provisions to help Tennessee's tax structure compete, as well as attract and maintain jobs. But there was no mention of a policy change or that it involved reimbursing a company's costs for a headquarters move.

McMillan said she knew the bill would help the state in its economic development efforts, but she didn't know Nissan was the beneficiary. She said she felt the law had adequate discussion before it passed.

Other lawmakers who voted against the measure didn't see it that way.

"There were unanswered questions, and I didn't like the idea of reimbursing people that much money," Rep. Joey Hensley, R-Hohenwald, said, adding that the $50,000 reimbursement seemed high to him.

"I don't mind helping them," Hensley said. "But that seemed like a lot of money for the state to be spending."

Harwell said her opposition had more to do with unanswered questions than anything else.

"No one is saying we're opposed to it," she said of the Nissan incentives. "What we are saying is, you need to have it on the board. When you're talking about the public's money, then the public has every right to know what's going on."

She said she's still not sure the policy is for the best.

"I think there's mixed blessings there," Harwell said. "Certainly, we want to expand our base here and encourage companies to come here. But I think it's a balancing act between what we are giving away."