City Commission not playing 'the blame game' with NN, Inc. mishap

Zach Vance • Apr 17, 2017 at 9:39 PM

Regardless of who is to blame for overlooking dates related to a tax abatement deal with a local industrial manufacturing company, Johnson City commissioners were not wanting to hear it. 

During Monday’s agenda meeting at City Hall, the city’s Industrial Development Board, along with NN Inc. representative Robbie Atkinson, joined a roundtable with city commissioners to discuss a resolution that would give NN additional time to meet job numbers agreed to in a payment-in-lieu of taxes, or PILOT, agreement.

The discussion basically centered on a date blunder in the original agreement, which would leave NN owing approximately $60,000 in property taxes because of its current employment numbers, and whether the City Commission would be willing to amend the original agreement to meet a state agreement.

To get to a “yes” vote, City Commissioner Joe Wise spoke about the public perception of giving the company a “re-do” on the tax agreement, and in doing so, eroding public trust in the payment-in-lieu of tax agreements the city makes with aspiring companies. 

“There are ways to talk about it. But the blame. The ‘we missed it.’ ‘It’s a mistake.’ ‘This happens with TIFs and PILOTs (all the time).’ That’s the problem,” Wise said.

“That’s what I’m concerned about because these instruments sit on a razor’s edge of public support, and the minute it looks like corporate welfare or a big giveaway, and I know that’s not what it is. But the minute it looks like that, and that argument begins to get traction (and) there are people out there ready to make that argument. You couldn’t get one of these plans to move IBMs headquarters to Johnson City.” 

What concerned Wise the most was the fact Commissioner Ralph Van Brocklin, who was not present at Monday’s meeting, had specifically asked the IDB about the dates prior to the commission voting on the original agreement in 2014.

Members of the IDB board, including Tommy Burleson and Chairman Gerald Thomas, said the blame should rest on them, if need be.

“We just made a mistake and I’ll be the first one to admit it. I mean we went through these documents. I’m not an attorney but I spent a lot of time reading these things and I missed some things,” Burleson said.

“What we did was get a great company to invest a lot of money and stay here. This is not costing the city any money. The city will still get the money (in the future). It’s not like the city is writing a check. The money will still come forth. It was just a mistake. If (the Washington County Economic Development Council) needs to take the hit, if IDB needs to take the hit, we’ll take the hit. We gave you all what we thought were documents that had been gone through.”

Thomas said at least four lawyers poured over the original agreement and failed to notice the date discrepancies. 

“It’s about the words. It’s about how we’re describing it. It’s not opposing what you’re asking for. It’s how you present it and it’s what it’s going to cost and it is costing something. It’s costing revenue we’re foregoing that we would otherwise be entitled to. It may just be $60,000,” Wise said.

“But what I’m saying is let’s present it like it’s a whole new deal, even if it’s not a whole new deal. And let us say, ‘You know what? NN Inc. is a great corporate citizen. I’d like to be for that. It’s not just an unconditional do-over. It’s good for Johnson City.’ That’s what I need and that’s what I don’t yet have.” 

Approved by city commissioners in April 2014, the metal bearings company headquarters was required to maintain 80 percent of the 200 jobs promised in the agreement by the end of 2016.

A Freedom of Information Act request submitted by Johnson City Press reporter Nathan Baker in February of this year showed the company only employed 64 employees, 136 fewer than the benchmark set in the PILOT agreement. The company’s full property tax assessment, currently zero, should have increased to 68 percent, which now amounts to around $60,000 in taxes. 

After meeting with NN officials, the IDB then recommended extending the agreement’s timeline due to discrepancies between the local resolution authorizing the PILOT and an accompanying state tax agreement.  

The official resolution, required by the IDB’s board, includes changing the annual jobs reporting date from Jan. 31 to May 9, which aligns with a state incentive contract. NN would then be required to file its next report by May 9, 2018.

Another change would be extending the length of time to create the new jobs from Dec. 31, 2015, to March 10, 2019, which would also align with the state agreement.  

Atkinson told commissioners NN was on track to add 30 more high-paying jobs in 2017.

“We are just about really where we thought we would be,” Atkinson said. “We’re not far behind when you look at the plan. We’re adding positions in 2017, then add the rest in 2018 and 2019. Those are senior management positions with people making well above the average wage in Johnson City.” 

Atkinson said the majority of the jobs were $100,000-plus annual salaries. 

Wise said the IDB’s board should frame the resolution by fixating on the “economic impact” of NN’s high-paying jobs rather than focusing solely on job numbers.

While reviewing the agreement, Northeast Tennessee Regional Economic CEO Mitch Miller said NN had already paid about $20,000 in personal property taxes that were supposed to be abated. 

“When the paperwork was filed, it also included personal property abatement. For whatever reason, the local tax agency did not abate that property. NN Inc. went ahead and paid that personal property tax because they did not want to have any kind of penalties and to make sure there were no issues on the tax side,” Miller said. 

Mayor David Tomita wrapped up Monday’s meeting rather bluntly, stating “If it isn’t clear. If the message has not been communicated clearly, and I don’t suspect it will be if we spend another 30 minutes on it, but we understand what happened. You’ve been told the end result is a ‘Yes’ and you’ve been given some guidance of what that process is.”

Email Zach Vance at zvance@johnsoncitypress.com. Follow Zach Vance on Twitter at @ZachVanceJCP. Like him on Facebook at Facebook.com/ZachVanceJCP.

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