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German manufacturer eyes Washington County site

Robert Houk • Apr 5, 2019 at 12:00 AM

Washington County commissioners are being asked to approve a 13-year payment-in-lieu of taxes agreement that could result in 179 new jobs.

The agreement would be part of a deal to land a German manufacturer that has promised to create those jobs as part of a $37.4 million capital investment over a five-year period.

Northeast Tennessee Regional Economic Partnership officials said the company, which makes fans, motors and other heating and cooling components, is looking to spend $1.2 million to buy 30 acres in the Washington County Industrial Park to build a 110,000-square-foot plant.

Alicia Summers, vice president of business development for the partnership, told members of the county’s Commercial, Industrial and Agricultural Committee on Thursday the county has been in negotiations with the unnamed international company since March 2018.

“We’ve signed a non-disclosure agreement with the company,” she told committee members, who voted 3-1 to send a resolution supporting the payment-in-lieu of taxes, or PILOT, agreement to the county’s Budget Committee next week.

Part Of The PILOT

Johnson City commissioners voted in February to rezone a tract on East Millard Street for what they were told was an unnamed manufacturer of automobile heating components to use an empty warehouse as a temporary production facility. Mitch Miller, chief executive officer of the economic partnership, said Thursday that rezoning was part of the deal with the German company.

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.

The 179 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 talking to suitors in two other locations — one in Texas and another in Tennessee. 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 April 22 on the PILOT.

Jobs And Taxes

The German company would become the third manufacturer to locate in the industrial park. Bush Hog, now Swedish-based ALO-TN, was the first to locate there in 1996. Two Japanese firms — Koyo/JTEKT and Nakaetsu Machining Technologies — followed in 2006.

“Those jobs are needed in Washington County, particularly in the western end of the county,” Commercial, Industrial and Agricultural Committee Chairman Phil Carriger said of the German company’s plans.

Commissioner Robbie Tester was the committee’s lone vote against the PILOT. Tester said he has a “fundamental issue when it comes to the role of government offering tax incentives to companies.” He said that is why he has voted against other tax incentive plans during his time on the commission.

He said PILOTs and other such agreements result in elected officials “picking and choosing” who benefits from tax abatement.

“The role of government should be to maintain a fair and level playing field for all taxpayers,” Tester said.

Terms Of The Deal

The 13-year PILOT agreement calls for the German company to be accountable for meeting defined annual job creation goals that will be monitored by the county attorney’s office, and in the case of non-compliance the company is liable for the repayment of the property taxes it has evaded. The company is required to meet 90 percent of its goal of 179 jobs by Dec. 31, 2023.

The PILOT also 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.

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