After HCA deal, some in council want incentives for small business

Sunday, December 2, 2012 at 10:05pm

Metro Councilman Josh Stites wished we weren’t having this conversation to begin with.

“My preference would be that we not get involved in that at all,” he told The City Paper. “That Metro not be involved in giving tax breaks for certain businesses. But if we’re going to do that, I think there are two things that are important. One is based upon number of jobs created, and solely based upon that, so it doesn’t matter what size headquarters you build or where your headquarters is, it’s based upon the number of jobs you create. And two, I think it needs to be available to everybody.”

Days ahead of a final council vote on one of the largest economic incentives packages in Nashville’s history, an offer to Nashville-based HCA estimated to total $66 million over 20 years in tax abatements and cash grants, Stites said that if the city is going to be in the business of handing out tax breaks, the process should be more open and equitable.

“That means a standard or matrix by which any job creator can look at our standard and determine, ‘If I bring this number of jobs to Nashville, these are the incentives available to me,’ ” he said. “That way it’s transparent, fair and available to everybody. It’s on the open market, so everybody knows what the rules are.”

Toward that end, Stites is mulling legislation that would give small businesses greater access to the kinds of tax breaks and other incentives used to entice corporate expansions or relocations in Davidson County. The details of such a proposal still need to be worked out, and Stites said he plans on filing the legislation early in the new year. For him, it’s an effort to make the best of a practice that he opposes in principle, but one that has become increasingly common in recent years.

Under Mayor Karl Dean’s administration, with the support of the council, tax breaks have become a more prominent feature of the city’s economic development efforts. Since Dean took office in 2007, the city has entered into 12 such arrangements with businesses, offering over $120 million in incentives (not including the HCA deal, which had not been finalized as of this writing).

The practice is certainly not unique to Nashville. In fact, it’s often driven by competition among various cities offering similar offers. Many times, Nashville has put tax breaks on the table in an effort to keep companies from relocating south to Williamson County. But that effort is often futile, Stites said, and even counterproductive — just one of the reasons he has consistently voted against such offers.

“From 1999 to 2007, we didn’t offer a dollar in these incentives,” he said, referring to the lack of incentives proposals during former Mayor Bill Purcell’s time in office. “And surprisingly, Nashville was doing OK. Did we lose some companies to Williamson County? Yeah, we did, but we still are. Often these incentives do not stop the bleeding in that respect, but I think the bigger point is we can recruit companies to Nashville by having a favorable tax environment, and good schools. And each one of these deals makes it harder for us to achieve those goals that all of us want.”

But if tax breaks and other incentives are a reality that’s here to stay, Stites said, he and others would like to see the process brought out from behind closed doors and made available to smaller businesses as well. According to the mayor’s Office of Economic and Community Development, requests for such incentives “are considered on a case-by-case basis” — a consideration that occurs beyond the public view — and, Stites reiterated, has consistently resulted in deals for “well-connected” and “well-to-do” companies.

“There are other council members who have said that they want to be involved in something that is available to small businesses,” he said. “That they see the same thing that everyone else sees, and that is that these deals are only available to a small number of businesses.”

One of those members is At-Large Councilman Charlie Tygard, who told The City Paper he’d like to work with Stites toward their shared goal of “leveling the playing field.”

“To give opportunities for small businesses,” Tygard said, “Give them incentives to expand both the footprint of their buildings, to increase the property tax base, but also to encourage the purchase of more updated equipment, and the hiring of new employees, especially if we can figure out how to make them Davidson County employees.”

Less than a week before the final vote on a significant tax break for the largest private health care facilities operator in the world, Stites said he’s surprised there aren’t more who see it his way.

“I’m shocked, really, that more of my colleagues on the council are not opposed to something that is so one-sided,” he said.    

7 Comments on this post:

By: Loner on 12/3/12 at 8:36

The HCA give-away scheme calls for forgoing another 66 million in tax revenues from HCA over a 20-year period. Adding the 120 million already given away to the proposed gift of 66 million to HCA yields a whopping 186 million in "incentives" that Mayor Dean will have given to his cronies in big business over the five-year period that he has been in office.

Every time Hizzoner and the Metro Meatheads give big business a free gift, the people of Metro have to come up with extra cash to make up the shortfall. There is no free lunch....you little folks are going to pay for the Frist family's, taxpayer-funded, banquet feast.

If Dean isn't getting kickbacks from his cronies on this, I'd be very surprised.

Extending the tax-giveaway program to "small business" sounds like a better idea than subsidizing fabulously wealthy outfits like HCA. But even if the tax breaks go to more deserving enterprises, the shortfall will be made up for by hosing the regular taxpaying public.

By: Loner on 12/3/12 at 8:53

Tax incentives make sense, if one is a beneficiary of the sweetheart deal.

The idea that the ends justify the means is often used to promote these rip-offs...usually, the argument goes like this: corporate tax revenue will be lost in the deal, but the offsetting rewards are job creation; and with those jobs, comes income tax revenues...but in a state without a personal income tax, that argument fails to make a lot of sense.

Once the period of tax-exemption expires, these outfits usually pull up stakes and dump their terminated work-force onto the unemployment rolls...often, they leave an empty, sometimes contaminated site behind...a clean-up job for the suckers who agreed to the sweetheart deal.

By the time these sweetheart deals expire, Mayor Dean and the Council will be out of office, collecting their generous pensions and benefits...the next generation gets stuck with the clean-up and the aftermath.

By: Loner on 12/3/12 at 9:00

Offering incentives is called, "choosing winners & losers", when the Democrats do it...but when the Tea-baggin' GOP does it, they call it, "economic development".

Politics is little more than the art of using & abusing euphemisms.

By: Loner on 12/3/12 at 9:33

Remember the rosy predictions about Dell, back in 1999? Remember the old adage, "....fool me twice, shame on me."

By: Moonglow1 on 12/4/12 at 9:55

Moonglow1: The NYT did an investigative series on corporate welfare.

I am a small business owner and get nothing so why in the h#ll am I subsidizing the billionaire Frist family.

If TN gives tax credits to billionaires then small business should obtain them too!

By: govskeptic on 12/4/12 at 2:24

A program such as this would be a sure train wreck. Far too many businesses
are too small and too poorly managed, failing often, for this to be anything less
than a political and losing debacle for the taxpayer and city dollars.

By: Moonglow1 on 12/5/12 at 10:03

Moonglow1: HCA was previously under investigation by the Justice Dept for Medicare fraud and paid 1 billion dollars to settle. So as a taxpayer I highly object to Corporate Welfare to a company already worth billions, owned by private equity and could relocate anytime, and has a history of questionable legal activities when the company was run by Rick Scott (now governor of Florida).

As a matter of fact, years ago the company pulled out of Nashville and moved to Louisville. So companies (especially those owned by private equity) are not to be trusted.

No company should receive taxpayer funding. Taxpayer money should never be siphoned from essential govt functions like police, fire, and education to give to a for profit billion dollar company.

Mr Stites was exactly correct and I commend him for his no vote. He apparently is the only council member with courage to stand against the moneyed interests and strong armed lobbyists employed by HCA.